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Problem 4-1 Comparative income statements; multiple-step format [LO4-1, 4-3,4-4, 4-5] Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): 2016 2015 Sales Cost of goods sold Administrative expenses Selling expenses Interest revenue Interest expense Loss on sale of assets of discontinued component $5,350,000 $ 4,450,000 3,050,000 2,190,000 865,000 990,000 550,000 502,000 169,000 238,000 238,000 126,000 159,000 On July 1, 2016, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2016, for $126,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows 1/1/16-9/30/16 2015 Sales Cost of goods sold Administrative expenses Selling expenses $ 590,000 $ 690,000 (385,000) (434,000) (69,000) (59,000) (39,000) (49,000) Operating income before taxes $ 97,000 $ 148,000 In addition to the account balances above, several events occurred during 2016 that have not yet been reflected in the above accounts 1. A fire caused $69,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event. 2. Inventory that had cost $59,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $6,000