Question

Traynor Corporation's capital structure consists of 50,000 shares of common stock at January 1 and as of year-end. At December 31, 2018 an analysis of the accounts and discussions with company officials revealed the following information:

	Sales revenue	$1,200,000
	Selling expenses	128,000
	Cash	60,000
	Accounts receivable	90,000
	Common stock	200,000
	Cost of goods sold	701,000
	Accumulated depreciation-machinery	180,000
	Dividend revenue	8,000
	Unearned service revenue	4,400
	Interest payable	1,000
	Land	370,000
	Patents	100,000
	Retained earnings, January 1, 2018	290,000
	Interest expense	17,000
	Administrative expenses	170,000
	Dividends declared and paid on preferred stock	24,000
	Allowance for doubtful accounts	5,000
	Notes payable (maturity 7/1/19)	200,000
	Machinery	450,000
	Materials	40,000
	Accounts payable	60,000

Additional information:

• Income tax rate for all income items is 30%.
• Traynor decided to discontinue its entire wholesale operations and on August 31, Traynor sold the wholesale operations to Donald Corporation for a loss of $30,000. The wholesale division had a total loss on operations of $50,000 from January 1 to August 31.
• There was an error noted in the prior year financial statements whereas depreciation expense of $20,000 was omitted.

Instructions:

In an excel spreadsheet, prepare the following:

PART A - Prepare a multiple-step income statement for 2018 for Porter Corporation that is presented in accordance with generally accepted accounting principles in the space provided on the next page. (25 points) PART B - Prepare a retained earnings statement for 2018 that is presented in accordance with generally accepted accounting principles in the space provided on the next page. (15 points)

Answer 1