Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):

	2024	2023
Sales revenue	$ 4,400,000	$ 3,500,000
Cost of goods sold	2,860,000	2,000,000
Administrative expense	800,000	675,000
Selling expense	360,000	302,000
Interest revenue	150,000	140,000
Interest expense	200,000	200,000
Loss on sale of assets of discontinued component	48,000	—

On July 1, 2024, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2024, for $48,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:

 

	1/1/2024–9/30/2024	2023
Sales revenue	$ 400,000	$ 500,000
Cost of goods sold	(290,000)	(320,000)
Administrative expense	(50,000)	(40,000)
Selling expense	(20,000)	(20,000)
Operating income before taxes	$ 40,000	$ 120,000

In addition to the account balances above, several events occurred during 2024 that have not yet been reflected in the above accounts:

A fire caused $50,000 in uninsured damages to the main office building. The fire was considered to be an unusual event.

Inventory that had cost $40,000 had become obsolete because a competitor introduced a better product. The inventory was written down to its scrap value of $5,000.

Income taxes have not yet been recorded.

Required:

Prepare a multiple-step income statement for the Reed Company for 2024, showing 2023 information in comparative format, including income taxes computed at 25% and EPS disclosures assuming 300,000 shares of outstanding common stock.

 

REED COMPANY
Comparative Income Statements
For the Years Ended December 31
	2024	2023
	$4,000,000	$3,000,000
Cost of goods sold	2,570,000	1,680,000
Gross profit (loss)	1,430,000	1,320,000
Operating expenses:
Administrative expense	750,000	635,000
Selling expense	340,000	282,000
Loss on building (fire damage)	50,000
Loss on inventory write-down	35,000
Total operating expenses	1,175,000	917,000
Operating income	255,000	403,000
Other income (expense):
Interest revenue	150,000	140,000
Interest expense	(200,000)	(200,000)
Total other income, net	(50,000)	(60,000)
Income from continuing operations before income taxes	205,000	343,000
Income tax expense
Income from continuing operations	205,000	343,000
Discontinued operations:
Income (loss) from operations of discontinued component
Income tax benefit (expense)
Income (loss) on discontinued operations	0	0
Net income	$205,000	$343,000
Earnings per share:
Income from continuing operations
Discontinued operations
Net income