Question

In: Accounting

Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal...

Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):

2018 2017
Sales $ 5,050,000 $ 4,150,000
Cost of goods sold 2,990,000 2,130,000
Administrative expenses 930,000 805,000
Selling expenses 490,000 442,000
Interest revenue 163,000 153,000
Interest expense 226,000 226,000
Loss on sale of assets of discontinued component 102,000


On July 1, 2018, 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, 2018, for $102,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:

1/1/18-9/30/18 2017
Sales $ 530,000 $ 630,000
Cost of goods sold (355,000 ) (398,000 )
Administrative expenses (63,000 ) (53,000 )
Selling expenses (33,000 ) (43,000 )
Operating income before taxes $ 79,000 $ 136,000


In addition to the account balances above, several events occurred during 2018 that have not yet been reflected in the above accounts:

A fire caused $63,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.

Inventory that had cost $53,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $4,000.

Income taxes have not yet been recorded.


Required:
Prepare a multiple-step income statement for the Reed Company for 2018, showing 2017 information in comparative format, including income taxes computed at 40% 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.)

REED COMPANY
Comparative Income Statements
For the Years Ended December 31
2018 2017
Sales revenue not attempted not attempted
Cost of goods sold not attempted not attempted
Gross profit (loss) 0 0
Operating expenses:
Administrative not attempted not attempted
Selling not attempted not attempted
Loss from fire damage not attempted not attempted
Loss from write-down of obsolete inventory not attempted not attempted
Total operating expenses 0 0
Operating income 0 0
Other income (expense):
Interest revenue not attempted not attempted
Interest expense not attempted not attempted
Total other expenses (net) 0 0
Income from continuing operations before income taxes not attempted not attempted
Income tax expense not attempted not attempted
Income from continuing operations 0 0
Discontinued operations:
Income (loss) from operations of discontinued component not attempted not attempted
Income tax benefit (expense) not attempted not attempted
Income (loss) on discontinued operations 0 0
Net income $0 $0
Earnings per share:
Income from continuing operations not attempted not attempted
Discontinued operations not attempted not attempted
Net income not attempted not attempted

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