Complete the requirements of E22-10 using the direct method.

In E22-10

Star land Corporation provided the following comparative balance sheets and income statement.

Star land Corporation

Income Statement

For the Year Ended December 31

 Current Year

Sales…………………………………………….       $ 1,875,050

Cost of Goods Sold……………………………...     1,125,030

Gross Profit………………………………………     $ 750,020

Selling, General, and Administrative Expenses….      $ 205,000

Bad Debt Expense………………………………..     4,394

Depreciation Expense…………………………….    39,525

Total Operating Expenses…………………………   $ 248,919

Income before Interest and Taxes…………………   $ 501,101

Loss on Disposal of Equipment…………………..     $ (50,000)

Interest Expense…………………………………...  (12,500)

Income before Tax…………………………………   $ 438,601

Income Tax Expense……………………………….  (175,440)

Net Income………………………………………… $ 263,161

Starland Corporation Balance Sheets At December 31 Assets Current Ye Prior Year Current Assets Cash Accounts Receivable net Merchandise Inventory Prepaid Expenses s 270,001 145,847 255,368 269,363 75,000 S 974,722 744,579 268,363 381,358 55,000 Total Current Assets Noncurrent Assets Property, Plant, and Equipment- net Total Noncurrent Assets Total Assets $3.854,542 ,323,471 $3,854,542 $4 323,471 $4,829,264 $5,068,049 Liabilities Current Liabilities Current Portion of Long-term Debt Accounts Payable Income Taxes Payable S 125,622 360,877 446,695 165,255 S 839,751 972,827 528,252 185.877 Total Current Liabilities Noncurrent Liabilities Notes Payable $ 730,854 635,597 $ 730,854 635,597 $1.570,605 1,608,424 Total Noncurrent Liabilities Total Liabilities Shareholders' Equity Common Stock, $1 par value Additional Paid-in Capital Retained Earnings 381,358 381,359 1,129,950 1129.950 2.287 351 2083317 Total Shareholders' Equity Less: Treasury Stock at Cost Total Liabilities and Shareholders Equity $3,798,659 3,594,625 (135,000) $4.829,264 $5,068,049 (540,000)