Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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:

  1. A fire caused $52,000 in uninsured damages to the main office building. The fire was considered to be an unusual event.
  2. 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.
  3. 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.)

image text in transcribed

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Maximizing Corporate Value Through Mergers And Acquisitions A Strategic Growth Guide

Authors: Patrick A. Gaughan

1st Edition

1118108744, 9781118108741

More Books

Students also viewed these Accounting questions

Question

8. Explain how to price managerial and professional jobs.pg 87

Answered: 1 week ago