In 2016, Kim Company sold land for $99,000 cash. The land had originally cost $54,000. Also, Kim sold inventory that had cost $182,000 for $284,000 cash.

In 2016, Kim Company sold land for $99,000 cash. The land had originally cost $54,000. Also, Kim sold inventory that had cost $182,000 for $284,000 cash. Operating expenses amounted to $50,000.


Required
a.    Prepare a 2016 multistep income statement for Kim Company.

 
b.    Assume that normal operating activities grow evenly by 24% during 2017. Prepare a 2017 multistep income statement for Kim Company.


 c. Determine the percentage change in net income between 2016 and 2017.
 

d.	Should the stockholders have expected the results determined in Requirement c?
	Yes

Explanation:

c.

Net income decreased by 33.5%.

d. If the shareholders look at operating income, they will find that operating income increased by 24% and this is expected because all recurring line items increased by 24%. However, net income decreased by 33.5%. because of the sale of land at a gain in 2016. Shareholders must be careful when only looking at the net income amount.


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