Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year
Question:
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):
2021 | 2020 | |||
Sales revenue | $ | 4,700,000 | $ | 3,800,000 |
Cost of goods sold | 2,920,000 | 2,060,000 | ||
Administrative expense | 860,000 | 735,000 | ||
Selling expense | 420,000 | 362,000 | ||
Interest revenue | 156,000 | 146,000 | ||
Interest expense | 212,000 | 212,000 | ||
Loss on sale of assets of discontinued component | 72,000 | — | ||
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On July 1, 2021, 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, 2021, for $72,000 less than their book value. Results of operations for the component ( included in the above account balances) were as follows:
1/1/2021–9/30/2021 | 2020 | ||||||||
Sales revenue | $ | 460,000 | $ | 560,000 | |||||
Cost of goods sold | (320,000 | ) | (356,000 | ) | |||||
Administrative expense | (56,000 | ) | (46,000 | ) | |||||
Selling expense | (26,000 | ) | (26,000 | ) | |||||
Operating income before taxes | $ | 58,000 | $ | 132,000 | |||||
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In addition to the account balances above, several events occurred during 2021 that have not yet been reflected in the above accounts:
- A fire caused $56,000 in uninsured damages to the main office building. The fire was considered to be an unusual event.
- Inventory that had cost $46,000 had become obsolete because a competitor introduced a better product. The inventory was written down to its scrap value of $6,000.
- Income taxes have not yet been recorded.
Required:
Prepare a multiple-step income statement for the Reed Company for 2021, showing 2020 information in comparative format, including income taxes computed at 25% and EPS disclosures assuming 500,000 shares of outstanding common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)
Intermediate Accounting
ISBN: 978-0078025839
9th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson , Wayne Thomas