Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): Sales revenue Cost of goods sold Administrative expense Selling expense Interest revenue Interest expense Loss on sale of assets of discontinued component 2020 2021 $4,900,000 $4,000,000 2,960,000 2,100,000 900,000 775,000 460,000 402,000 160,000 150,000 220,000 88,000 220,000 On July 1, 2021, 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, 2021, for $88,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: Sales revenue Cost of goods sold Administrative expense Selling expense Operating income before taxes 1/1/2021- 9/30/2021 $ 500,000 (340,000) (60,000) (30,000) 2020 $ 600,000 (380,000) (50,000) (30,000) $ 70,000 $ 140,000 In addition to the account balances above, several events occurred during 2021 that have not yet been reflected in the above accounts: 1. A fire caused $60,000 in uninsured damages to the main office building. The fire was considered to be an unusual event 2. Inventory that had cost $50,000 had become obsolete because a competitor introduced a better product. The Inventory was written down to its scrap value of $4,000. 3. Income taxes have not yet been recorded. Sales revenue Cost of goods sold Gross profit (loss) REED COMPANY Comparative Income Statements For the Years Ended December 31 2021 2020 $ $ 4,400,000 3,400,000 2,620,000 1,720,000 1,780,000 1,680,000 Operating expenses: Administrative expense 840,000 725,000 Selling expense 430,000 372,000 Loss on building (fire damage) 60,000 Loss on inventory write-down 46,000 Total operating expenses 1,376,000 1,097,000 Operating income Other income (expense): Interest revenue 404,000 583,000 160,000 150,000 Interest expense (220,000) (220,000) Total other income, net (60,000) (70,000) Income from continuing operations before income taxes 344,000 513,000 Income tax expense 86,000 128,250 Income from continuing operations 258,000 384,750 Discontinued operations: Income from operations of discontinued component (18,000) 140,000 Income tax benefit (expense) (4,500) X 35,000 x Income (loss) on discontinued operations (22,500) 175,000 Net income $ 235,500 $ 559,750 Net income Earnings per share: Income from continuing operations Income on discontinued operations Net income $ 235,500 $559,750 $ 0.32 $ 0.48 (0.02) 0.13 $ 0.31 x $ 0.61