Selected information from the December 31, Year 3, trial balance of Pitt Corp. follows:

Debit	Credit
Common stock	$1,250,000
Additional paid-in capital	2,187,500
Retained earnings, January 1, Year 4	1,650,000
Net sales	6,250,000
Cost of sales	$3,750,000
Selling and administrative expenses	1,212,500
Interest expense	122,500
Gain on extinguishment of debt	130,000
Loss on sale of equipment	225,000
Loss due to earthquake damage	700,000

Pitt uses U.S. GAAP.


Other financial data for the year ended December 31, Year 3:

•	In September, Year 3, one of Pitt's operating plants was destroyed by an earthquake. Earthquakes are rare in the area in which the plant was located. The portion of the resultant loss not covered by insurance was $700,000.
•	On October 1, Year 3, Pitt Corp. committed itself to a formal plan to sell its Kam Division's assets early in Year 4. On that date, Pitt estimated that the fair value of the component's assets was $25,000 less than the carrying value. Pitt also estimated that Kam would incur operating losses of $100,000 for the year-ended December 31, Year 3 and $50,000 for the period January 1, Year 4, through February 28, Year 4. All estimates proved to be materially correct.
•	Pitt Corp. bought a truck in January of Year 1 for $180,000. The truck was expected to have a ten-year useful life and no salvage value. During Year 3, Pitt Corp. realized that the truck would only have a total useful life of 5 years. The truck is being depreciated using the straight-line method. The depreciation expense (on the truck) to be included in selling and administrative expenses has not yet been recorded.
•	The company has an ongoing policy of retiring long-term debt.
•	Pitt Corp. had unrealized gains of $10,000 on available-for-sale securities during the current year.
•	Pitt Corp's pension plan recorded prior service cost of $6,000 during Year 3 due to plan amendments.
•	Pitt's effective income tax rate is 30%.

Complete the following income statement. Double-click on the shaded cells in Column A and select the appropriate account from the list provided. Enter the appropriate amount in the shaded cells in Column B. Numbers to be subtracted must be entered as negative numbers.

	A	B
1	Net sales	$6,250,000
2	Cost of sales	($3,750,000)
3
4
5	Selling and administrative expenses
6	Operating income	$0
7
8	Other income and expenses:
9	Interest expense	($122,500)
10
11	Other gains and losses:
12	Loss on sale of equipment	($225,000)
13
14
15
16	Income before income tax
17	Income tax expense
18	Income from continuing operations
19
20
21	Net income	$0

Answer rating: 100% (QA)

Complete the following income statement Doubleclick ... View the full answer