O’Malley Corporation was incorporated and began business on January 1, 2022. It has been successful and now requires a bank loan for additional working capital to finance expansion. The bank has requested an audited income statement for the year 2025. The accountant for O’Malley Corporation provides you with the following income statement which O’Malley plans to submit to the bank.

Instructions

Indicate the deficiencies in the income statement presented above. Assume that the corporation desires a single-step income statement.

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Sales revenue Dividends Gain on recovery of insurance proceeds from earthquake loss Less: O'Malley Corporation Income Statement Selling expenses Cost of goods sold Advertising expense Loss on obsolescence of inventories Loss on discontinued operations Administrative expense Income before income tax Income tax Net income $101,100 510,000 13,700 34,000 48,600 73,400 $850,000 32,300 38,500 920,800 780,800 140,000 56,000 $ 84,000