Question

Addison Corporation is currently going through a Chapter 11 bankruptcy. The company has the following account balances for the current year.

  

	Debit		Credit
Advertising expense	$	39,000
Cost of goods sold		226,000
Depreciation expense		37,000
Interest expense		3,000
Interest revenue			$	37,000
Loss on closing of branch		124,000
Professional fees		86,000
Rent expense		31,000
Revenues				572,000
Salaries expense		85,000

  

Prepare an income statement for this organization. The effective tax rate is 30 percent (realization of any tax benefits is anticipated). (Negative amounts under "Reorganization items" should be indicated by a minus sign.)

The income statement is broken into

Cost and expenses

Earnings before reorganization items and tax effects and Reorganizations items

List of Accounts include

Advertising expense

Cost of goods sold

Depreciation expense

Income tax benefit

Interest expense

Interest revenue

Loss on closing of branch

Professional fees

Rent expense

Revenues

Salaries

Answer 1

Addison Corporation
Income Statement
Revenues		572,000.0
Costs & Expenses:
Cost of Goods Sold	226,000.0
Rent Expense	31,000.0
Salaries Expense	85,000.0
Depreciation Expense	37,000.0
Advertising Expense	39,000.0
Interest Expense	3,000.0	421,000.0
Earnings before reorganization items and tax effects		151,000.0
Reorganization Items:
Loss on Closing of Branch	(124,000.0)
Professional Fees	(86,000.0)
Interest Revenue	37,000.0	(173,000.0)
Loss before Income Tax Benefit		(22,000.0)
Tax Benefits - $22,000 X 30%		6,600.0
Net Loss		(15,400.0)