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Problem 4-1 Comparative inoome statements: multiple-step format [LBJ-1. 4-3. 4-4, 4-5] Selected Information about Income statement acoounts for the Reed Company Is presented bah-w (the mr'npany's scal year ends on December 31}: 2015 2.01 5 Sales 5 5.100.000 5 4.200.000 oat of goods sold 3.001000 2.140.000 Admlnlstratlve expenses 040.000 015.000 Selllrrg expenses 501000 452.000 Interest revenue 154.000 154.000 Interest expense 225.000 225.000 Loss on sale of assets ofdiscontlnued component 105.000 0n Jul}.I 1. 2015. the oomp-anv adopted a plan to dlsoontinue a dlvislon that qualltles as a component of an enlltv as dened by GAME The assets of the component were sold on September 30. 2015. for 5105.000 less than thelr book value. Results of operallons for the oomponent {Included In the above aooount balanossjl were as 1ollovrs'. 1J'1I1E-E'St'1 21015 Sales 5 540.000 5 540.000 oat of goods sold {200.000} {404.030} Admlnlstratlve expenses [04.000] [54.0003 Selllrrg expenses [34.000]: {44.030} peratlng Income beforetaxes $ 02.000 5 120.030 In addltlon to the aooount balances above. several events occurred durlng 2015 that have notvet been reflected In the above accounts: 1. Are caused 554.000 ln unlnsured damages to the male ofce bulldlng. The Ilre Iultras consldered to be an Infrequent but not unusual event. 2. Inventory that had oust $54,000 had become obsolete because a competitor Introduced a better product. The Inventonr 1.Ivas sold as scrap for 55.000. 2. Income taxes have notvet been recorded. Requlred: Prepare a multiple-step Inoome statement for the Reed ananv for 2015. sluswlng 2015 Information In mr'nparatlve 1on'nat. includlng Inoome taxes computed at 4051: and EPS dleclosures assumlng 500.000 shares of oommon stock. [Amounts to be deducted should be Indicated with a mlnus slgn. Round EPB answers to 2 decimal planed \fSales revenue 4,560,130!) 0 2,040,000 9 1,920,001} 0,500,000 0 1,100,000 9 1,024,000 Cost of goods sold Gross prot {loss} Operating expenses: Administrative 010,000 a 455,000 9 04,000 9 40,000 9 1,455,000 455,000 1101000 9 Selling 400,000 9 Loss from re damage Loss from write-down of obsolete inventory 1,169,001} 655,000 Total operating ant-eases Operating income Other income {enmense}: Interest revenue 154,001) 0 Interest 010101100 {220,000} a Total other expenses {net} {64,0013} Income from continuing operations before income taxes 4131,1301) a 100,400 9 240,5[i 154,000 a {220,000} a (74,000) 501,000 a 002,400 9 040,500 Income tax expense Income from continuing operations Discontinued operations: Income {loss} from operations of discontinued com 1 1 nent (24,00019 100,000 9 155.2001 0 32,301) 431 .400! Income tax benet {expense} Income [loss]: on discontinued operations {14,4013} Net income 226,201} Earnings per share: Income from continuing operations {0.0310 Discontinued operations H H H- H P P '3 3 3 3 0 0 0 W a? {El- { 1:131: $353 4::- 000 00 Net income Sales revenue Gust pf gentle sold Dpem'dnp expenses h _|.. .5 EEE an: ass Selllng expense General and edn'linietrellve expense Remuunp casts Tstal epereng expenses Dpem'dnp Inpen'le Other Incenle {expense} Less en sales :11 Inveslrnents H __ E 0 Interest expense Interest revenue Either Inmn'le {expense} Inepn'le hefere emerdineryr Item IrIeen'Ie tax expense Inepn'le frem penlinulng eperepns hefere Ineen'e Iexee Diemntlnued epere'liens Imerne frern eperalJpne sfdieesntlnued mmpenent Innerne tax expense Irxzen'le fnem dissentlnued epera'lims Mel Inssrne Other mnmrehenelu'e Ineeme [Ieesj Unreellzed gslne 1'an Inveslrnents. net at lax Less frem feremn wrreney trenelaen. net pftex H H PF 5 E A E 5% m 551' -II m \"1' DD m D m D I-' D an an H a a BB Eemlnpe per she re'. Innen'le frsm mnlinulng epereens Diemntlnued epere'liens Mel Inmrne r-I. r-u._|I- A \" ' E HE \"E: 3.. 03 as BB \frequirement 1 Sales revenue Cost of goods sold Gross profit Operating expenses: Selling General and administrative Restructuring costs Total operating expenses Operating income Other income (expense): Loss on sales of investments Interest expense Interest revenue Other income (expense) Income from continuing operations before income taxes Income tax expense Income from continuing operations Discontinued operations: Income from operations of discontinued component (including gain on disposal of $1,440) Income tax expense Income from discontinued operations Income before extraordinary item Extraordinary item Net income Other comprehensive income: Unrealized gains from investments, net of tax Loss from foreign currency translation, net of tax Total other comprehensive income Comprehensive income Earnings per share: Income from continuing operations before extraordinary item Discontinued operations Net income requirement 1 Net income Other comprehensive income (loss): Unrealized gains from investments, net of tax Loss from foreign currency translation, net of tax Total other comprehensive income Comprehensive income 15700 -6400 9300 -1320 -820 -1400 -3540 5760 -240 -200 80 -360 5400 -1080 4320 1152 -456 696 5016 0 5016 272 -208 64 5080 3.60 0.58 4.18 5016 272 -208 64 5080 \fSales revenue 4,560,130!) 0 2,040,000 9 1,920,001} 0,500,000 0 1,100,000 9 1,024,000 Cost of goods sold Gross prot {loss} Operating expenses: Administrative 010,000 a 455,000 9 04,000 9 40,000 9 1,455,000 455,000 1101000 9 Selling 400,000 9 Loss from re damage Loss from write-down of obsolete inventory 1,169,001} 655,000 Total operating ant-eases Operating income Other income {enmense}: Interest revenue 154,001) 0 Interest 010101100 {220,000} a Total other expenses {net} {64,0013} Income from continuing operations before income taxes 4131,1301) a 100,400 9 240,5[i 154,000 a {220,000} a (74,000) 501,000 a 002,400 9 040,500 Income tax expense Income from continuing operations Discontinued operations: Income {loss} from operations of discontinued com 1 1 nent (24,00019 100,000 9 155.2001 0 32,301) 431 .400! Income tax benet {expense} Income [loss]: on discontinued operations {14,4013} Net income 226,201} Earnings per share: Income from continuing operations {0.0310 Discontinued operations H H H- H P P '3 3 3 3 0 0 0 W a? {El- { 1:131: $353 4::- 000 00 Net income Sales revenue Gust pf gentle sold Dpem'dnp expenses h _|.. .5 EEE an: ass Selllng expense General and edn'linietrellve expense Remuunp casts Tstal epereng expenses Dpem'dnp Inpen'le Other Incenle {expense} Less en sales :11 Inveslrnents H __ E 0 Interest expense Interest revenue Either Inmn'le {expense} Inepn'le hefere emerdineryr Item IrIeen'Ie tax expense Inepn'le frem penlinulng eperepns hefere Ineen'e Iexee Diemntlnued epere'liens Imerne frern eperalJpne sfdieesntlnued mmpenent Innerne tax expense Irxzen'le fnem dissentlnued epera'lims Mel Inssrne Other mnmrehenelu'e Ineeme [Ieesj Unreellzed gslne 1'an Inveslrnents. net at lax Less frem feremn wrreney trenelaen. net pftex H H PF 5 E A E 5% m 551' -II m \"1' DD m D m D I-' D an an H a a BB Eemlnpe per she re'. Innen'le frsm mnlinulng epereens Diemntlnued epere'liens Mel Inmrne r-I. r-u._|I- A \" ' E HE \"E: 3.. 03 as BB \frequirement 1 Sales revenue Cost of goods sold Gross profit Operating expenses: Selling General and administrative Restructuring costs Total operating expenses Operating income Other income (expense): Loss on sales of investments Interest expense Interest revenue Other income (expense) Income from continuing operations before income taxes Income tax expense Income from continuing operations Discontinued operations: Income from operations of discontinued component (including gain on disposal of $1,440) Income tax expense Income from discontinued operations Income before extraordinary item Extraordinary item Net income Other comprehensive income: Unrealized gains from investments, net of tax Loss from foreign currency translation, net of tax Total other comprehensive income Comprehensive income Earnings per share: Income from continuing operations before extraordinary item Discontinued operations Net income requirement 1 Net income Other comprehensive income (loss): Unrealized gains from investments, net of tax Loss from foreign currency translation, net of tax Total other comprehensive income Comprehensive income 15700 -6400 9300 -1320 -820 -1400 -3540 5760 -240 -200 80 -360 5400 -1080 4320 1152 -456 696 5016 0 5016 272 -208 64 5080 3.60 0.58 4.18 5016 272 -208 64 5080