Question
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): 2021 2020 Sales revenue
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):
2021 | 2020 | |||
Sales revenue | $ | 4,500,000 | $ | 3,600,000 |
Cost of goods sold | 2,880,000 | 2,020,000 | ||
Administrative expense | 820,000 | 695,000 | ||
Selling expense | 380,000 | 322,000 | ||
Interest revenue | 152,000 | 142,000 | ||
Interest expense | 204,000 | 204,000 | ||
Loss on sale of assets of discontinued component | 56,000 | |||
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 $56,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:
1/1/20219/30/2021 | 2020 | ||||||||
Sales revenue | $ | 420,000 | $ | 520,000 | |||||
Cost of goods sold | (300,000 | ) | (332,000 | ) | |||||
Administrative expense | (52,000 | ) | (42,000 | ) | |||||
Selling expense | (22,000 | ) | (22,000 | ) | |||||
Operating income before taxes | $ | 46,000 | $ | 124,000 | |||||
In addition to the account balances above, several events occurred during 2021 that have not yet been reflected in the above accounts:
- A fire caused $52,000 in uninsured damages to the main office building. The fire was considered to be an unusual event.
- Inventory that had cost $42,000 had become obsolete because a competitor introduced a better product. The inventory was written down to its scrap value of $5,000.
- Income taxes have not yet been recorded.
Required: Prepare a multiple-step income statement for the Reed Company for 2021, showing 2020 information in comparative format, including income taxes computed at 25% and EPS disclosures assuming 300,000 shares of outstanding common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)
REED COMPANY Comparative Income Statements For the Years Ended December 31 2021 2020 0 0 Gross profit (loss) Operating expenses: Total operating expenses Operating income Other income (expense): 0 0 0 0 0 0 Total other income, net Income from continuing operations before income taxes 0 0 Income from continuing operations Discontinued operations: Income (loss) on discontinued operations Net income Earnings per share: 0 0 $ 0 0 $ Net income
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