Instructions

(a) Prepare a multiple-step income statement.

(b) Prepare a retained earnings statement.

Porter Corporation's capital structure consists of 50,000 shares of common stock. At December 31, 2010 an analysis of the accounts and discussions with company officials revealed the following information:

Sales $1,100,000

Purchase discounts 18,000

Purchases 642,000

Income from operations of discontinued product line 35,000

Loss on disposal of discontinued production line 70,000

Selling expenses 128,000

Cash 60,000

Accounts receivable 90,000

Unrealized gain on available for sale securities 12,000

Common stock 200,000

Accumulated depreciation machinery 180,000

Dividend revenue 8,000

Inventory, January 1, 2010 152,000

Inventory, December 31, 2010 125,000

Unearned service revenue 4,400

Interest payable 1,000

Land 370,000

Retained earnings, January 1, 2010 290,000

Interest expense 17,000

Administrative expenses 170,000

Dividends declared 24,000

Allowance for doubtful accounts 5,000

Notes payable (maturity 7/1/13) 200,000

Machinery 450,000

Materials 40,000

Accounts payable 60,000

Pension loss from minimum pension adjustment 20,000

Correction of error overstatement of depreciation expense in 2015 32,000

Assume an income tax rate of 30%