1. 1. The auditor for First Corporation noticed that its income statement (copied below) was incorrect.

First Corporation

Income Statement

December 31

Sales Revenue $130,000

Cost of Goods Sold 80,000

Accounts Receivable 19,500

Gross Profit 30,500

Interest Expense 15,000

Selling Expense 13,000

Total Operating Costs (28,000)

Operating Profit 2,500

Interest Revenue 16,500

Interest Payable 4,0008,500

Income Before Taxes 11,000

Income Tax Expense (12,850)

Net Income (Loss) ($1,850)

Required

Prepare a corrected multi-step income statement such as the example on page 241 of the textbook.

1. A company enters into the following transactions:

a. Issued $25,000 par value common stock in exchange for cash.

b. Issued a long-term note in exchange for a machine worth $45,000.

c. Received $21,000 in cash from accounts receivable.

d. Paid $7,500 on accounts payable.

e. Issued $50,000 par value common stock upon conversion of convertible bonds with a face value of $50,000.

f. Declared and paid a cash dividend of $78,000.

g. Sold an investment costing $10,000 for $10,000 in cash.

Required

Classify each of the preceding transactions as a cash inflow or a cash outflow from operating activities, investing activities, or financing activities, or as a non-cash transaction.

Answer rating: 100% (QA)

a First Corporation Income Statement For the Year Ended December 3... View the full answer