O?Malley Corporation was incorporated and began business on January 1, 2017. It has been successful and now requires a bank loan for additional working capital to finance expansion. The bank has requested an audited income statement for the year 2020. The accountant for O?Malley Corporation provides you with the following income statement which O?Malley plans to submit to the bank.

Instructions

Indicate the deficiencies in the income statement presented above. Assume that the corporation desires a single-step income statement.

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O'Malley Corporation Income Statement Sales revenue $850,000 Dividends 32,300 Gain on recovery of insurance proceeds from earthquake loss 38,500 920,800 Less: Selling expenses Cost of goods sold Advertising expense Loss on obsolescence of inventories $101,100 510,000 13,700 34,000 48,600 Loss on discontinued operations Administrative expense 780,800 73,400 Income before income tax 140,000 56,000 Income tax $ 84,000 Net income