Retained earnings, December 31, 20X5 $ 650,000

Sales revenue 1,650,000

Selling and administrative expenses 265,000

Hurricane loss (pre-tax) on plant (unusual item) 470,000

Cash dividends declared on common stock 33,600

Cost of goods sold 940,000

Gain resulting from computation error on depreciation charge in 20X4 (pre-tax) 520,000

Other revenue 320,000

Other expenses 480,000

Instructions

Prepare in good form a multiple-step income statement for the year 20X6. Assume a 40% tax rate and that 125,000 shares of common stock were outstanding during the year.

Farr Company

INCOME STATEMENT

For the Year Ended December 31, 20X6

Sales ____________________

Cost of goods sold ____________________

Gross profit ____________________

Selling and administrative expenses ____________________

Income from operations ____________________

Other revenue ____________________

Other expenses _____________________

Income before taxes ____________________

Income taxes _____________________

Income before unusual item ____________________

Unusual loss, net of applicable income taxes of $188,000 _____________________

Net income _________________ _

Earnings per share of common stock

Income before unusual item $________________

Unusual item, net of tax $_______ _______

Net income $____ ________ _