1. Problem 5-1(p207) American horse company
Mohammed Alhouty Dr.james wood
Abdullah aljafar Sec:101
Nezar almusallam
Ayman alsultan

2. Introduction
American horse company decided to discontinue its entire wholesale operation and retain its manufacturing operation.
on September 15, American horse sold the wholesale operations to Rogers Company.
during 2004, there were 300,000 shares of common stock outstanding all year.
The problem is require to prepare a multiple- step income, and statement of retained earnings.

3. Solution
American Horse Company Income Statement Seals 25000,0000 Less cost of good sold (17,000,000) Gross profit 8000,000 Less selling and administrative expanse (4700,000) Income from operation 3300,000 Add other revenues and gains Interest revenue 70,000 Gain on the sale of investments 110, ,000 Less other expanses and losses Write of goodwill (820,000) Income from continuing operations before income tax 2660,000 Less Income tax (905,000) Income from continuing operations 1755,000

4. Discounting operations Loss on operations (net) (40,000) Loss on disposal (net) (440,00) (530,000) Income before extraordinary items 1,225,000 Less extraordinary items flood damages (390,000) Net income 835,000

5. Earnings per share
1- Earnings per share for continuing operations = = Income continuing operations _ dividends stock/ outstanding shares = _ 70,0000/ 300,000 = Earnings per share for discontinuing operations = = Income discontinuing operations _ dividends stock/ outstanding shares = 1,225,000 _ 70,0000/ 300,000 = Earnings per share for net income= =income for net income_ dividends stock/ outstanding shares= = 835,000 _ 70,000/300,0000= 2.55

6. Retained Earnings Statement
American Horse Company Retained Earnings Statement Retained earnings, January 1 980,000 Add: Net income 835,000 1,815,000 Less: Dividends Preferred stock (70,000) Common stock (250,000) (320,000) Retained earnings, December 31 1,445,000

7. Conclusion
we get the benefits of this problem because we learned of how to prepare a multiple-step income statement.
Knowing the two type of income statement:
single- step: A single-step income statement does not distinguish between different kinds of revenues or expenses.
multi-step: A multiple-step income statement separates operating revenue and expenses from other types of revenues and expenses.
we think is a multiple-step is much better then a single step.

8. References http://www.investopedia.com
accounting-course/04Xpg03.html
asp#axzz1rfeuBZEi