Question

Shown below is an income statement for 2017 that was prepared by a junior accountant at Junior Corporation.

Junior Corporation

Income Statement

December 31, 2017

       Sales revenue..........................................................................................................       $975,000

       Investment revenue...................................................................................................           19,500

       Cost of merchandise sold..........................................................................................       (408,500)

       Selling expenses......................................................................................................       (155,000)

       Administrative expense.............................................................................................       (215,000)

       Interest expense.......................................................................................................        (13,000)

       Income before special items.......................................................................................         203,000

       Special items

              Loss on disposal of a segment of the business........................................................         (30,000)

              Major fire loss.................................................................................................         (80,000)

       Net income tax liability............................................................................................        (27,900)

       Net income.............................................................................................................       $ 65,100

Required

In good form, prepare a multiple-step income statement for 2017 for Junior Corporation that is presented in accordance with generally accepted accounting principles (including format and terminology). Junior Corporation has 50,000 common shares outstanding and has a 20% income tax rate on all tax related items. As a private corporation, Junior does not disclose earnings per share information.

Required

In good form, prepare a partial 2017 income statement for Turnover, taking into account the effects (if any) of the above items. The statement should start with income from continuing operations before income taxes. Unless otherwise indicated, you may assume an income tax rate of 40% for all items. Earnings per share calculations are not required.

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
Sales Revenue		$         975,000
Less: Cost of Merchandise Sold		$       -408,500
Gross Margin		$         566,500
Less: Selling Expense	$       -155,000
Less: Administrative Expense	$       -215,000
Total Expense		$       -370,000
Operating Income		$         196,500
Other Revenue and Expenses:
Investment Revenue	$           19,500
Interest Expense	$          -13,000
Total Other Revenue and Expenses		$              6,500
Income before extraordinary Items		$         203,000
Extraordinary Items:
Loss on disposal of a segment of the business	$          -30,000
Major fire loss	$          -80,000
Total Extraordinary Items		$       -110,000
Income Before tax		$           93,000
Less: Income Tax 30%		$          -27,900
Net Income		$           65,100