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Operating Income and Net Income Calculation for Spenser Co. (2010)

This problem outlines the financials of Spenser Co. for the year ending December 31, 2010. It provides key figures such as net sales, cost of goods sold, and various expenses like selling, general and administrative expenses, research and development costs, and interest expenses. The task is to calculate the operating income and net income based on the provided data, demonstrating the steps to arrive at gross profit, operating income, and ultimately, net income after accounting for taxes and extraordinary gains or losses.

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Operating Income and Net Income Calculation for Spenser Co. (2010)

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  1. Accounting What the Numbers Mean 9e Demonstration Problem Chapter 9 – Problem 18 Calculate Operating Income and Net Income

  2. Problem Definition • The following information is available from the accounting records of Spenser Co. for the year ended December 31, 2010: Selling, general and administrative expenses. . . . . . . . . . . . . . . . $ 51,000 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000 Extraordinary gain from lawsuit settlement, net of tax expense of $28,000. . . . . . . . . . . . . . . . . . . . . . . . . . . 104,000 Research and development expense . . . . . . . . . . . . . . . . . . . . . . . 37,000 Loss from discontinued operations, net of tax savings of $5,000 . . . . . . . . . . . . . . . . . . . . …. . . . . . 16,000 Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,000 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579,000 Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,000 Net cash provided by operations. . . . . . . . . . . . . . . . . . . . . . . . 148,000 Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272,000

  3. Problem Definition • Calculate the operating income for Spenser Co. for the year ended December 31, 2010. • Calculate the company’s net income for 2010.

  4. Problem Solution a. Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $579,000

  5. Problem Solution a. Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $579,000 Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (272,000)

  6. Problem Solution a. Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $579,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (272,000) Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $307,000

  7. Problem Solution a. Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $579,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (272,000) Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $307,000 Selling, general and administrative expense . . . . . . . (51,000)

  8. Problem Solution a. Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $579,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (272,000) Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $307,000 Selling, general and administrative expense. . . . . . . . . . (51,000) Research and development expenses . . . . . . . . . . . . . (37,000)

  9. Problem Solution a. Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $579,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (272,000) Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $307,000 Selling, general and administrative expense. . . . . . . . . . (51,000) Research and development expenses . . . . . . . . . . . . . . . (37,000) Operating income (or Income from operations) . . . . $219,000

  10. Problem Definition • Calculate the operating income for Spenser Co. for the year ended December 31, 2010. • Calculate the company’s net income for 2010.

  11. Problem Solution b. Operating income (or Income from operations) . . $219,000

  12. Problem Solution b. Operating income (or Income from operations) . . . . $219,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000)

  13. Problem Solution b. Operating income (or Income from operations) . . . . $219,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000) Income from continuing operations before taxes . $155,000

  14. Problem Solution b. Operating income (or Income from operations) . . . . $219,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000) Income from continuing operations before taxes. . . . $155,000 Provision for income taxes. . . . . . . . . . . . . . . . . . . . (74,000)

  15. Problem Solution b. Operating income (or Income from operations) . . . . $219,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000) Income from continuing operations before taxes. . . . $155,000 Provision for income taxes. . . . . . . . . . . . . . . . . . . . . (74,000) Income from continuing operations . . . . . . . . . . . . $ 81,000

  16. Problem Solution b. Operating income (or Income from operations) . . . . $219,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000) Income from continuing operations before taxes. . . . $155,000 Provision for income taxes. . . . . . . . . . . . . . . . . . . . . (74,000) Income from continuing operations. . . . . . . . . . . . . . $ 81,000 Loss from discontinued operations, net of tax savings of $5,000. . . . . . . . . . . . . . . . . (16,000)

  17. Problem Solution b. Operating income (or Income from operations) . . . . $219,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000) Income from continuing operations before taxes. . . . $155,000 Provision for income taxes. . . . . . . . . . . . . . . . . . . . . (74,000) Income from continuing operations. . . . . . . . . . . . . . $ 81,000 Loss from discontinued operations, net of tax savings of $5,000.. . . . . . . . . . . . . . . . . . (16,000) Earnings from extraordinary item. . . . . . . . . . . . . $ 65,000

  18. Problem Solution b. Operating income (or Income from operations) . . . . $219,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000) Income from continuing operations before taxes. . . . $155,000 Provision for income taxes. . . . . . . . . . . . . . . . . . . . . (74,000) Income from continuing operations. . . . . . . . . . . . . . $ 81,000 Loss from discontinued operations, net of tax savings of $5,000 .. . . . . . . . . . . . . . . . . (16,000) Earnings from extraordinary item . . . . . . . . . . . . . . . $ 65,000 Extraordinary gain from lawsuit settlement, net of tax expense of $28,000 …………. . . . . . . . 104,000

  19. Problem Solution b. Operating income (or Income from operations) . . . . $219,000 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000) Income from continuing operations before taxes. . . . $155,000 Provision for income taxes. . . . . . . . . . . . . . . . . . . . . (74,000) Income from continuing operations. . . . . . . . . . . . . . $ 81,000 Loss from discontinued operations, net of tax savings of $5,000... . . . . . . . . . . . . . . . . (16,000) Earnings from extraordinary item . . . . . . . . . . . . . . . $ 65,000 Extraordinary gain from lawsuit settlement, net of tax expense of $28,000. . . . . . . . . . . . . . . . . 104,000 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $169,000

  20. Accounting What the Numbers Mean 9e You should now have a better understanding ofhow to calculate operating income and net income. Remember that there is a demonstration problem for each chapter that is here for your learning benefit. David H. Marshall Wayne W. McManus Daniel F. Viele

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