A newly hired staff accountant prepared the pre-audit income statement of Be Fit Recreation Incorporated for the year ending December 31, 2011.

The following information was obtained by Be Fit€™s independent auditor.
(a) Net revenues in the income statement included the following items.
Sales returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,700
Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,300
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,400
Loss on sale of short-term investment . . . . . . . . . . . . . . . . . . . . . 2,800
Extraordinary gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,300
(b) Of the total depreciation expense reported in the income statement, 40% relates to stores and store equipment, 60% to office building and equipment.
(c) At the beginning of 2011, management decided to close one of Be Fit€™s retail stores. Be Fit is a large company and does not attempt to prepare complete financial reports for each individual store. The inventory and equipment were moved to another Be Fit store, and the land and building were sold on July 1, 2011, at a pretax gain of $32,000. This amount has been reported under discontinued operations.
(d) The income tax rate is 30%.

Instructions:
Prepare a corrected multiple-step income statement for the year ended December 31,2011.

Transcribed Image Text:

Net revenues Cost of goods sold Gross profit Expenses: $645,000 305,200 $339,800 Sales salaries and commissions...$116.400 Officers' and office salaries 121,000 64,000 Advertising expense Other general and administrative expenses .. ..........16,300 18.700 336,400 Income from continuing operations $ 3.400 Income before income taxes. Income taxes (30%) Net income 32,000 $35.400 0,620 24,780 $ 2.48 Earnings per common share (10,000 shares outstanding . . . . . ..