The income statement below was prepared by a new and inexperienced employee in the accounting department of Phoenix, Inc., a business organized as a corporation.

Instructions

a. Prepare a corrected income statement for the year ended December 31, 2015, using the format illustrated in Exhibit 12–2. Include at the bottom of your income statement all appropriate earnings-per-share figures. Assume that throughout the year the company had outstanding a weighted average of 180,000 shares of a single class of capital stock.

b. Prepare a statement of retained earnings for 2015. (As originally reported, retained earnings at December 31, 2014, amounted to $2,175,000.)

c. What does the $62,000 “gain on sale of treasury stock” represent? How would you report this item in Phoenix’s financial statements at December 31, 2015?

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PHOENIX, INc. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2015 Net sales .... $10,800,000 62,000 Gain on sale of treasury stock . Excess of issuance price over par value of capital stock ... 510,000 60,000 Prior period adjustment (net of income tax) 36,000 Extraordinary gain (net of income tax) . $11,468,000 Total revenue Less: $6,000,000 Cost of goods sold Selling expenses General and administrative expenses Loss from settlement of litigation 1,104,000 1,896,000 24,000 Income tax on continuing operations 720,000 Operating loss on discontinued operations (net of income tax benefit) .... Loss on disposal of discontinued operations (net of income tax benefit) 252,000 420,000 ..... Dividends declared on common stock 350,000 Total costs and expenses 10,766,000 $ 702,000 Net income