Question
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): 2013 2012 Sales $
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):
2013 | 2012 | |||||
Sales | $ | 5,100,000 | $ | 4,200,000 | ||
Cost of goods sold | 3,000,000 | 2,140,000 | ||||
Administrative expenses | 940,000 | 815,000 | ||||
Selling expenses | 500,000 | 452,000 | ||||
Interest revenue | 164,000 | 154,000 | ||||
Interest expense | 228,000 | 228,000 | ||||
Loss on sale of assets of discontinued component | 106,000 | |||||
On July 1, 2013, 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, 2013, for $106,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: |
1/1/13-9/30/13 | 2012 | |||||
Sales | $ | 540,000 | $ | 640,000 | ||
Cost of goods sold | (360,000 | ) | (404,000 | ) | ||
Administrative expenses | (64,000 | ) | (54,000 | ) | ||
Selling expenses | (34,000 | ) | (44,000 | ) | ||
Operating income before taxes | $ | 82,000 | $ | 138,000 | ||
In addition to the account balances above, several events occurred during 2013 that have not yet been reflected in the above accounts: | |
1. | A fire caused $64,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event. |
2. | An earthquake caused $114,000 in property damage to one of Reeds factories. The amount of the loss is material and the event is considered unusual and infrequent. |
3. | Inventory that had cost $54,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scr ap for $5,000. |
4. | Income taxes have not yet been accrued. |
Required: |
Prepare a multiple-step income statement for the Reed Company for 2013, showing 2012 information in comparative format, including income taxes computed at 40% and EPS disclosures assuming 500,000 shares of common stock. (Amounts to be deducted should be indicated with a minus sign.Round EPS answers to 2 decimal places.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started