The before-tax income for Fitzgerald Co. for 2012 was $101,000 and $77,400 for 2013. However, the accountant noted that the following errors had been made.

  1. Sales for 2012 included amounts of $38,200 which had been received in cash during 2012, but for which the related products were delivered in 2013. Title did not pass to the purchaser until 2013.
  2. The inventory on December 31, 2012, was understated by $8,640.
  3. The bookkeeper in recording interest expense for both 2012 and 2013 on bonds payable made the following entry on an annual basis.

Interest Expense           15,000
        Cash                                 15,000

The bonds have a face value of $250,000 and pay a stated interest rate of 6%. They were issued at a discount of $10,000 on January 1, 2012, to yield an effective-interest rate of 7%. (Assume that the effective-interest method should be used.)

  4. Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2012 and 2013. Repairs in the amount of $8,000 in 2012 and $9,400 in 2013 were so charged. The company applies a rate of 10% to the balance in the Equipment account at the end of the year in its determination of depreciation charges.

Instructions
Prepare a schedule showing the determination of corrected income before taxes for 2012 and 2013.