Assume that the A division of Perez Corporation experienced the following transactions during the year ended December 31, 2011:

a. Suppose division A supplied copy products for a customer for the discounted price of $263,000. Under normal conditions they would have provided these services for $296,000. Other revenues totaled $55,000.

b. Salaries cost the division $24,000 to provide these services. The division had to pay employees overtime occasionally. Ordinarily the salary cost for these services would have been $18,100.

c. All other expenses, excluding income taxes, totaled $235,000 for the year. Income tax expense was 33% of income before tax.

d. The A division has two operating subdivisions: basic retail and special contracts. Each division is accounted for separately to indicate how well each is performing. However, the A division combines the statements of all subdivisions to show results for the A division as a whole.

e. Inflation affects the amounts that the A division must pay for copy machines. To show the effects of inflation, net income would drop by $1,000.

f. If A division were to go out of business, the sale of its assets would bring in $145,000 in cash.

Requirements

1. Prepare the A divisions income statement for the year ended December 31, 2011.

2. For items a through f, identify the accounting concept or principle that provides guidance in accounting for the item described. State how you have applied the concept or principle in preparing the income statement.