Counting Crows Ltd. provided the following information for the year 2019.
Retained earnings, January 1, 2015..........................................................£ 600,000
Administrative expenses.........................................................................240,000
Selling expenses...................................................................................300,000
Sales revenue....................................................................................1,900,000
Cash dividends declared..........................................................................80,000
Cost of goods sold...............................................................................850,000
Gain on sale of investments......................................................................62,700
Loss on discontinued operations................................................................75,000
Rent revenue.......................................................................................40,000
Unrealized holding gain on non-trading equity securities...................................17,000
Income tax applicable to continuing operations.............................................187,000
Income tax benefit applicable to loss on discontinued operations.........................25,500
Income tax applicable to unrealized holding gain on non-trading equity securities......2,000
Weighted-average shares outstanding........................................................100,000
Accounting
Prepare (a) an income statement for 2019, (b) a retained earnings statement for 2019, and (c) a statement of comprehensive income using the two statement format.
Analysis
Explain how income statement subheads can provide useful information to financial statement readers.
Principles
In a recent meeting with its auditor, Counting Crows' management argued that the company should be able to prepare a pro forma income statement, with some one-time administrative expenses reported similar to discontinued operations. Is such reporting consistent with the qualitative characteristics of accounting information as discussed in the Conceptual Framework? Explain.