Corrected Income Statement

A newly hired staff accountant prepared the pre-audit income statement of Be Fit Recreation Incorporated for the year ending December 31, 2015.

Net revenues $645,000

Cost of goods sold 305,200

Gross profit $339,800

Expenses:

Sales salaries and commissions $116,400

Officers and office salaries. 121,000

Depreciation.. 64,000

Advertising expense. 18,700

Other general and administrative expenses 16,300

336,400

Income from continuing operations. $3,400

Discontinued operations:

Gain on disposal of business segment. 32,000

Income before income taxes.. $35,400

Income taxes (30%) 10,620

Net income.. $24,780

Earnings per common share (10,000 shares outstanding) $2.48

The following information was obtained by Be Fits independent auditor.

(a) Net revenues in the income statement included the following items.

Sales returns and allowances.$8,700

Interest revenue.5,300

Interest expense.9,400

Loss on sale of short-term investment...2,800

Extraordinary gain..13,300

(b) Of the total depreciation expense reported in the income statement, 40% relates to stores and store equipment, 60% to office building and equipment.

(c) At the beginning of 2015, management decided to close one of Be Fits retail stores. Be Fit is a large company and does not attempt to prepare complete financial reports for each individual store. The inventory and equipment were moved to another Be Fit store, and the land and building were sold on July 1, 2015, at a pretax gain of $32,000. This amount has been reported under discontinued operations.

(d) The income tax rate is 30%.

Instructions: Prepare a corrected multiple-step income statement for the year ended December 31, 2015.