Project Description:

(multiple-step income, retained earnings) presented below is information related to dickinson company for 2010.

retained earnings balance, january 1, 2010 $ 980,000
sales 25,000,000
cost of goods sold 16,000,000
interest revenue 70,000
selling and administrative expenses $4,700,000
write-off of goodwill 820,000
income taxes for 2010 1,244,000
gain on the sale of investments (normal recurring) 110,000
loss due to flood damage—extraordinary item (net of tax) 390,000
loss on the disposition of the wholesale division (net of tax) 440,000
loss on operations of the wholesale division (net of tax) 90,000
dividends declared on common stock 250,000
dividends declared on preferred stock 80,000

prepare a multiple-step income statement and a retained earnings statement. dickinson company decided to discontinue its entire wholesale operations and to retain its manufacturing operations. on september 15, dickinson sold the wholesale operations to rogers company. during 2010, there were 500,000 shares of common stock outstanding all year.
question 2
charlie brown, controller for the kelly corporation, is preparing the company’s income statement at year-end. he notes that the company lost a considerable sum on the sale of some equipment it had decided to replace. since the company has sold equipment routinely in the past, brown knows the losses cannot be reported as extraordinary. he also does not want to highlight it as a material loss since he feels that will reflect poorly on him and the company. he reasons that if the company had recorded more depreciation during the assets’ lives, the losses would not be so great. since depreciation is included among the company’s operating expenses, he wants to report the losses along with the company’s expenses, where he hopes it will not be noticed.
(a) what are the ethical issues involved?
(b) what should brown do?
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