In: Accounting
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): |
2016 | 2015 | |||
Sales | $ | 4,700,000 | $ | 3,800,000 |
Cost of goods sold | 2,920,000 | 2,060,000 | ||
Administrative expenses | 860,000 | 735,000 | ||
Selling expenses | 420,000 | 372,000 | ||
Interest revenue | 156,000 | 146,000 | ||
Interest expense | 212,000 | 212,000 | ||
Loss on sale of assets of discontinued component | 74,000 | — | ||
On July 1, 2016, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2016, for $74,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: |
1/1/16-9/30/16 | 2015 | ||||||
Sales | $ | 460,000 | $ | 560,000 | |||
Cost of goods sold | (320,000 | ) | (356,000 | ) | |||
Administrative expenses | (56,000 | ) | (46,000 | ) | |||
Selling expenses | (26,000 | ) | (36,000 | ) | |||
Operating income before taxes | $ | 58,000 | $ | 122,000 | |||
In addition to the account balances above, several events occurred during 2016 that have not yet been reflected in the above accounts: |
|
1. |
A fire caused $56,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event. |
2. |
Inventory that had cost $46,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $6,000. |
3. | Income taxes have not yet been recorded. |
Required: |
Prepare a multiple-step income statement for the Reed Company for 2016, showing 2015 information in comparative format, including income taxes computed at 20% and EPS disclosures assuming 500,000 shares of common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.) |
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