Assume that the Kinko's Division of FedEx Corporation experienced the following transactions during the year ended December 31, 20X5:

a. Suppose Kinko's provided copy services for Microsoft for the discounted price of $250,000. Under normal conditions Kinko's would have provided these services for $280,000. Other revenues totaled $50,000.

b. Salaries cost Kinko's $20,000 to provide these services. Kinko's had to pay employees overtime. Ordinarily the salary cost for these services would have been $18,000.

c. Other expenses totaled $240,000. Income tax expense was 40% of income before tax.

d. Kinko's has 2 operating subdivisions: basic retail and special contracts. Each subdivision is accounted for separately to indicate how well each is performing. At year end, Kinko's combines the statements of all subdivisions to show results for the Kinko's Division as a whole.

e. Inflation affects the amounts that Kinko's must pay for copy machines. To show the effects of inflation, net income would drop by $3,000.

f. If Kinko's were to go out of business, the sale of its assets would bring in $150,000 in cash.

Required

1. Prepare the Kinko's Division's income statement for the year ended December 31, 20X5.

2. For items a through f, identify the accounting concept or principle that provides guidance in accounting for the item. State how you have applied the concept or principle in preparing Kinko's income statement.