Problem 3 (40 points) (suggested time: 10 minutes)

The adjusted trial balance of Cicero Enterprises included the following accounts as of Dec. 31, 2014:

Debits Credits

Sales revenue 1,800,000

Interest revenue 80,000

Unearned revenue 60,000

Gain on sale of land (infrequent but not unusual item) 50,000

Cost of goods sold 1,200,000

Salaries and wages expense 160,000

Prepaid expense 450,000

Depreciation expense 150,000

Interest expense 40,000

Marketing and administrative expenses 50,000

Income tax expense 90,000

In addition, the company has decided to sell its cable TV division and the division is held for sale at year-end. The sale is estimated to generate a loss before tax of $30,000. This division accounted for 20% of the entire companys main operating activities (not its peripheral activities). Cicero Enterprises had 200,000 shares of stock outstanding throughout the year. You have enough information to figure out Cicero Enterprises tax rate.

Required: Prepare a multiple-step income statement.