Question

Prepare an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share.

Sales	1,360,000
Shares outstanding	104,000
Cost of goods sold	700,000
Interest expenses	34,000
Selling and administration expenses	49,000
Depreciation expenses	23,000
Preferred stock dividend	86,000
Taxes	100,000

Short answer

The earning per share is $3.54.

Step-by-step solution

Indirect expense

Indirect expense means the expense incurred by the company that is not directly related to the production of the goods.It includes the personnel cost, electricity expense, etc.

Income statement for Virginia Slim Wear

Particulars	Amount ($)
Sales	1,360,000
Less: Cost of goods sold	700,000
Gross profit	660,000
Less: Selling and administrative expenses	49,000
Less: Depreciation expenses	23,000
Less: Interest expenses	34,000
Operating income	554,000
Less:Taxes	100,000
Net income after tax	454,000
Less: Preferred stock dividend	86,000
Income available for shareholders	368,000
No. of shares outstanding	104,000
Earnings per share	3.54