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): 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

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

Auditing A Practical Approach With Data Analytics

Authors: Raymond N. Johnson, Laura Davis Wiley, Robyn Moroney, Fiona Campbell, Jane Hamilton

2nd Edition

1119786045, 978-1119785996

More Books

Students also viewed these Accounting questions

Question

Explain the importance of Human Resource Management

Answered: 1 week ago

Question

Discuss the scope of Human Resource Management

Answered: 1 week ago

Question

Discuss the different types of leadership

Answered: 1 week ago

Question

Write a note on Organisation manuals

Answered: 1 week ago