Assume that the Special Contract Division of Staples experienced the following transactions during the year ended \(\cdot\) December 31, 2020:

a. Suppose the division provided copy services to a customer for the discounted price of \(\$ 250,00\). Under normal conditions, Staples would have provided these services for \(\$ 280,000\). Other revenues totalled \(\$ 50,000\).

b. Salaries cost the division \(\$ 20,000\) to provide these services. The division had to pay employees overtime. Ordinarily, the salary cost for these services would have been \(\$ 18,000\).

c. Other expenses totalled \(\$ 240,000\). Income tax expense was \(30 \%\) of income before tax.

d. Staples has two operating divisions. Each division is accounted for separately to indicate how well each is performing. At year-end, Staples combines the statements of divisions to show results for Staples as a whole.

e. Inflation affects the amounts that Staples must pay for copy machines. To show the effects of inflation, net income would drop by \(\$ 3,000\).

f. If Staples were to go out of business, the sale of its assets would bring in \(\$ 150,000\) in cash.

{Requirements}

1. Prepare the Special Contracts Division's income statement for the year ended December 31, 2020.

2. Identify the accounting concepts, assumptions, or principles used in accounting for the items described in a through

f. State how you have applied the concept, assumption, or principle in preparing the Division's income statement.