Question
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): 2018 2017 Sales $
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):
2018 | 2017 | |||
Sales | $ | 5,200,000 | $ | 4,300,000 |
Cost of goods sold | 3,020,000 | 2,160,000 | ||
Administrative expenses | 960,000 | 835,000 | ||
Selling expenses | 520,000 | 472,000 | ||
Interest revenue | 166,000 | 156,000 | ||
Interest expense | 232,000 | 232,000 | ||
Loss on sale of assets of discontinued component | 114,000 | |||
On July 1, 2018, 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, 2018, for $114,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:
1/1/18-9/30/18 | 2017 | ||||||||
Sales | $ | 560,000 | $ | 660,000 | |||||
Cost of goods sold | (370,000 | ) | (416,000 | ) | |||||
Administrative expenses | (66,000 | ) | (56,000 | ) | |||||
Selling expenses | (36,000 | ) | (46,000 | ) | |||||
Operating income before taxes | $ | 88,000 | $ | 142,000 | |||||
In addition to the account balances above, several events occurred during 2018 that have not yet been reflected in the above accounts:
A fire caused $66,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.
Inventory that had cost $56,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $7,000.
Income taxes have not yet been recorded.
Required: Prepare a multiple-step income statement for the Reed Company for 2018, showing 2017 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.)
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