(Identification of Income Statement Deficiencies) John Amos Corporation was incorporated and began business on January 1, 2004. 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 2004. The accountant for John Amos Corporation provides you with the following income statement which John Amos 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 Dividends JOHN AMOS CORPORATION INCOME STATEMENT Gain on recovery of insurance proceeds from earthquake loss (extraordinary) Less: Selling expenses $850,000 32,300 38,500 920,800 $101,100