Required: Prepare a multiple-step income statement in good form.

Calculate retained earnings as of December 31.

Prepare a classified balance sheet in good form.

Calculate the provided ratios 20 points

Additional Information:

Assume that all taxes are at 30% unless otherwise indicated. The income tax expense on continuing operations and the income tax liability have not yet been recorded.

Line Item 1 refers to a loss of $70,000 on uninsured damaged from a meteor that crashed into a plant facility in New Mexico. The meteor is considered BOTH UNUSUAL AND INFREQUENT. The applicable tax rate was 35%.

Line Item 2 is income from the publishing division of the firm prior to May 1, 2016. On May 1, management decided to spin-off [discontinue] the operations.

Line Item 3 is also related to the publishing division mentioned in c above. Actual losses on the divisions operations after May 1 totaled $50,000. Management further expected additional losses of $30,000 on operations and a loss of $220,000 on the sale of the divisions assets.

Line Item 4 arose from the sale of long-term investments. The portfolio that originally cost $250,000 was sold for $284,000.

Line Item 5 arose from discovery of equipment, costing $600,000 that had been written off in 2014 as an operating expense. As of the beginning of the 2016 the accumulated depreciation was $100,000. The book value of the equipment was $500,000.

Line Item 6 refers to restructuring costs.

Line Item 7 refers to inventory that was on Hand on December 31, and was discovered to be obsolete during the year-end count on January 15, 2017.

The investment account represents two portfolios. The first portfolio cost $200,000 and is worth $215,000. These stocks and bonds are available currently for sale to raise cash resources. The other investment, costing $1,000,000 and worth $1,000,000, will be held indefinitely [long-term] by management.

Included in goodwill is an amount equal to $100,000 that management created after a successful advertising campaign. The offsetting credit was to paid-in capital in excess of par value: common.

During 2016, management decided that the usefulness of the franchise would only last four of the remaining five years. Consequently, management increased the amortization by $100,000 or 25 percent in 2016. The new estimate was used in 2016 and would be continued for the remaining three years.

Inventory on December 31, 2016 was $200,000 after considering the decline from line item 7.

The state authorized 100,000 shares of 8 % preferred stock with a par value of $100 of which 8,000 shares have been issued.

The state also authorized 2,000,000 shares of common stock, with a par value of $10 par value. There are no shares in treasury.

The bonds will be refinanced when they are due in 2017.

Foreign currency translation losses were $ 3,000.

Thornhill Company
Trial Balance
as of December 31, 2016
Account Title		Debit		Credit
8 %, Preferred Stock		$ -		$ 1,000,000.00
Accounts Payable				120,000
Accounts Receivable		300,000
Accumulated Depreciation: building				970,000
Accumulated Depreciation: equipment				3,550,000
Administrative Expenses		400,000
Bond Payable				4,000,000
Building		2,000,000
Cash		100,000		$ -
Common Stock (200,000 shares outstanding)				5,550,000
Discount on Bonds Payable		125,000
Dividends		300,000
Equipment		5,000,000
Franchise		340,000
Freight-in		15,000
Goodwill		785,000
Income Taxes Expenses		88,200
Income taxes Payable				88,200
Interest Expense		700,000
Inventory		170,000
Investments		1,200,000
Land		800,000
Long-term Notes Payable				2,500,000
Net Sales				5,300,000
Paid-in Capital in excess of par value: common				300,000
Plant Facilities under Construction		8,000,000
Prepaid Expenses		60,000
Purchase Discounts				65,000
Purchase Returns and Allowances				125,000
Purchases		2,575,000
Retained Earnings				747,500
Selling Expenses		650,000
Item 1 (net of taxes of $24,500)		45,500
Item 2 (net of taxes of $6,000)				14,000
Item 3 (net of taxes of $90,000)		210,000
Item 4				34,000
Item 5 (net of taxes of $150,000)				350,000
Item 6		840,000
Item 7		10,000
Total		$ 24,713,700		$ 24,713,700

Use the Trial balance and the additional informatons to solve for Multi-step Income Satatement