Audio Affection, Inc. sells automotive and home stereo equipment. It has 50,000 shares of $100 par common stock outstanding and 10,000 shares of $2, $100 par cumulative preferred stock outstanding as of December 31, 2006. List the errors you find in the following income statement for the year ended December 31,2006.

Transcribed Image Text:

Audio Affection, Inc. Income Statement For the Year Ended December 31, 2006 $9,450,000 7,100,000 $2,350,000 Operating expenses: Administrative expenses . . . .320,000 1,140,000 1,210,000 420,000 790,000 Income from continuing operations before income tax........... . Cumulative effect on prior years' income (decrease) of changing to a different depreciation method (204,000) (30,000) Income before condemnation of land, restructuring charge, 556,000 Extraordinary items: Gain on condemnation of land, net of applicable 120,000 (59,500) Restructuring charge, net of applicable income tax of $25,500.... Loss on discontinued operations (net of applicable (184,000) 432,500 Net income Ear nings per common share: Income from continuing operations . . . .._ . . . . Cumulative effect on prior years' income (decrease) of S 15.80 Fixed asset impairment Income before extraordinary item and discontinued operations Extraordinary items: (4.08) (0.60) 11.12 . 2.40 Restructuring charge . (3.68) 5 8.65