11 -2 (L earn i ng Obj ec tiv e 1: Ev al u a t e qu al it y o f earn i ngs ) Study the 2012 income..
11-2 (Learning Objective 1: Evaluate quality of earnings) Study the 2012 income statement of Original Imports, Inc., and answer these questions about the company:
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Year Ended
(In thousands except per share amounts)
2012
2011
1 Net sales
$1,825,425
$1,806,475
Operating costs and expenses:
2 Cost of sales (including buying and store occupancy costs)
1,121,490
1,045,580
3 Selling, general, and administrative expenses
549,850
526,150
4 Depreciation and amortization
5 Operating income (loss)
55,275
48,450
1,726,615
1,620,180
98,810
186,295
Nonoperating (income) and expenses:
6 Interest and investment income
(2,625)
(2,710)
7 Interest expense
1,725
1,630
8 Income (loss) from continuing operations before income taxes 9 Provision (benefit) for income taxes
10 Income (loss) from continuing operations 11 Discontinued operations:
(900)
(1,080) 99,710
36,684 187,375
69,615
63,026
117,760
12 Income (loss) from discontinued operations
(2,400)
280
13 Net income (loss)
Earnings (loss) per share from continuing operations:
14 Basic
Earnings (loss) per share from discontinued operations:
15 Basic
Earnings (loss) per share:
16 Basic
$ 60,626
$ 118,040
$ 0.39
$ 1.62
$ (0.03)
$ 0.00
$ 0.36
$ 1.62
1. How much gross profit did Original earn on the sale of its products in 2012? How much was income from continuing operations? Net income?
2. At the end of 2012, what dollar amount of net income would most sophisticated investors use to predict Original’s net income for 2013 and beyond? Name this item, give its amount, and state your reason.
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