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

On July 1, 2011, 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, 2011, for $50,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:

In addition to the account balances above, several events occurred during 2011 that have not yet been reflected in the above accounts:
1. A fire caused $50,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.
2. An earthquake caused $100,000 in property damage to one of Reed's factories. The amount of the loss is material and the event is considered unusual and infrequent.
3. Inventory that had cost $40,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $5,000.
4. Income taxes have not yet been accrued.

Prepare a multiple-step income statement for the Reed Company for 2011, showing 2010 information in comparative format, including income taxes computed at 40% and EPS disclosures assuming 300,000 shares of common stock.

  • CreatedJune 24, 2013
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