A newly hired staff accountant prepared the pre-audit income statement of Jericho Recreation Incorporated for the year ending December 31, 2008.

The following information was obtained by Jericho's independent auditor.

(a) Net revenues in the income statement included the following items.

Sales returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 9,500

Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . . . . . 6,600

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . 10,600

Loss on sale of short-term investment . . . . . . . . . . . . . .. . . . . . . 3,000

Extraordinary gain . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... . . . . . . . 16,000

(b) Of the total depreciation expense reported in the income statement, 60% relates to stores and store equipment, 40% to office building and equipment.

(c) At the beginning of 2008, management decided to close one of Jericho's retail stores. Jericho is a large company and does not attempt to prepare complete financial reports for each individual store. The inventory and equipment were moved to another Jericho store, and the land and building were sold on July 1, 2008, at a pretax gain of $40,000. This amount has been reported under discontinued operations.

(d) The income tax rate is 30%.

Instructions:

Prepare a corrected multiple-step income statement for the year ended December 31,2008.

Transcribed Image Text:

Net revenues Cost of goods sold Gross proft $797.000 300,800 $496,200 enses Sales salaries and commissions Officers and office salaries Depreciation Advertising expense Other eneral and administrative expenses $160,000 210.000 56,000 13.400 38.800 478,200 $ 18,000 Income from Discontinued operations: continuing operations Gain on disposal of business segment Income before income taxes Income taxes (30%) Net income 40,000 58,000 17,400 40.600 $ 4.06 Earn ings per common share (10.000 s hares outstanding)