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 | $ | 5,250,000 | $ | 4,350,000 |
Cost of goods sold | 3,030,000 | 2,170,000 | ||
Administrative expenses | 970,000 | 845,000 | ||
Selling expenses | 530,000 | 482,000 | ||
Interest revenue | 167,000 | 157,000 | ||
Interest expense | 234,000 | 234,000 | ||
Loss on sale of assets of discontinued component | 118,000 | |||
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 $118,000 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 | $ | 570,000 | $ | 670,000 | |||||
Cost of goods sold | (375,000 | ) | (422,000 | ) | |||||
Administrative expenses | (67,000 | ) | (57,000 | ) | |||||
Selling expenses | (37,000 | ) | (47,000 | ) | |||||
Operating income before taxes | $ | 91,000 | $ | 144,000 | |||||
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 $67,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.
Inventory that had cost $57,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $8,000.
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 800,000 sha
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