Exercise 1:

Franklin Kite Co. Inc.

Income statement
For a specific period of time

Revenues

Service revenue 900,000

Cost of goods sold 400,000

Gross profit 500,000

Expenses

Interest expenses 40,000

Selling and administrative expense 60,000
Depreciation expense 20,000
Taxes 50,000

Total expenses 170,000

Net income 330,000

Basic earning per share (EPS) (330,000 - 80,000) ÷ 50,000 = 5

 Exercise 2:

Virginia Slim Wear

Income statement
For a specific of time

Revenues

Sales 1,360,000
Cost of goods sold 700,000

Gross profit 660,000

Expenses

34,000
Interest expense 49,000
Selling and administrative expense 23,000
Depreciation expense 100,000
Taxes

Total expenses 206,000

Net income 454,000

Basic earning per share (EPS) (454,000 - 86,000) ÷ 104,000 = 3,538