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

		2018		2017
Sales	$	4.450.000	$	3.550.000
cost of goods sold		2.870.000		2.010.000
administrative expenses		810.000		685.000
selling expenses		370.000		322.000
interest income		151.000		141.000
interest expense		202.000		202.000
Loss on sale of discontinued component assets		54.000		—

On July 1, 2018, the company adopted a plan to terminate a division that qualifies as part of an entity as defined by GAAP. The component's assets were sold for $54,000 less than book value on September 30, 2018. The results of the transactions for the component ( included in the account balances above ) are as follows:

	1/1/18-9/30/18						2017
Sales		$	410.000				$	510.000
cost of goods sold			(295.000	)				(326.000	)
administrative expenses			(51.000	)				(41.000	)
selling expenses			(21.000	)				(31.000	)
Operating income before tax		$	43.000				$	112.000

In addition to the above account balances, several events occurred in 2018 that have not yet been reflected in the above accounts:

A fire caused $51,000 in uninsured damage to the main office building. The fire was considered a rare but not unusual event.

The inventory, which cost $41,000, was obsolete as a competitor launched a better product. The inventory was sold as scrap for $5,000.

Income taxes have not yet been recorded.

Required:
Prepare a multi-step income statement for Reed Company showing 2017 information in comparison for 2018, including income taxes calculated at 40% and EPS disclosures assuming 400,000 common stock.

Answer rating: 100% (QA)

The multistep income statement for Reed Company would be prepared as follows 2018 Net Sales Total Sa... View the full answer