Accounting 2371.

Quiz - Chapter 4 Sterling Company prepared the following Income Statement for review by its auditor: Sterling Company Income Statement For the Year Ended 12/31/19 Sales $7,500,000 Cost of goods sold 3,800,000 Gross profit 3,700,000 Operating expenses 1,900,000 Income before income taxes 1,800,000 Income tax expense (30%) 540,000 Net income $1,260,000 Sterling Company has had 200,000 shares of common stock outstanding all year. Included in cost of goods sold is an unusually large $250,000 writedown of obsolete inventory. Operating expenses include (a) additional bad debt expense of $50,000 due to a decision to increase the Allowance for Doubtful Accounts because of a change in economic conditions, and (b) a loss of $100,000 due to a fire in the warehouse. On October 1, Sterling decided to spin-off its manufacturing division, which the auditor determines is a separate business segment. After this decision, Sterling omitted the division from the income statement. The division's operating loss up to 10/1/19 was $150,000. After 10/1/19, it lost an additional $40,000. Sterling expects to sell the net assets in January 2020. Required: Prepare the corrected Income Statement for Sterling that would be prepared by the auditor in accordance with GAAP. everbe Sales revenue