Problem solving Question (5 Marks)

On December 31, 2018 an analysis of the accounts and discussions with company officials of Herald Corp revealed the following information:

Sales1000,000

Loss on discontinued operations (net of tax)28,000

Selling expenses128,000

Cash60,000

Accounts receivable90,000

Share capital200,000

Accumulated depreciation180,000

Dividend revenue8,000

Unearned service revenue4,400

Accrued interest payable1,000

Land370,000

Patents100,000

Interest expense10,000

General and administrative expenses150,000

Allowance for doubtful accounts5,000

Prepaid insurance3,000

Machinery and equipment450,000

Cost of goods sold651,000

Accounts payable60,000

The amount of income taxes applicable to ordinary income was 10,600, excluding the tax effect of the discontinued operations loss which amounted to 12,000.

Instructions

(a)Prepare an income statement