A newly hired staff accountant prepared the pre-audit income statement of Be Fit
Recreation Incorporated for the year ending December 31, 2013.
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $645,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305,200
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $339,800
Expenses:
Sales salaries and commissions . . . . . . . . . . . . . . . . . . . . . . . . . . $116,400
Officers' and office salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,000
Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,700
Other general and administrative expenses . . . . . . . . . . . . . . . . . . . 16,300 336,400
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,400
Discontinued operations:
Gain on disposal of business segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,000
Income before income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,400
Income taxes (30%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,620
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 24,780
Earnings per common share (10,000 shares outstanding) . . . . . . . . . . . . . . . . . . . . . . $ 2.48
The following information was obtained by Be Fit's independent auditor.
(a) Net revenues in the income statement included the following items.
Sales returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,700
Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,300
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,400
Loss on sale of short-term investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800
Extraordinary gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,300
(b) Of the total depreciation expense reported in the income statement, 40% relates to stores and store equipment, 60% to office building and equipment.
(c) At the beginning of 2013, management decided to close one of Be Fit's retail stores. Be Fit 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 Be Fit store, and the land and building were sold on July 1, 2013, at a pretax gain of $32,000. This amount has been reported under discontinued operations.
Instructions:
Prepare a corrected multiple-step income statement for the year ended December 31, 2013?