Treetop Corporation is a manufacturer of specialty equipment used in the film editing industry. The company needs

Question:

Treetop is a manufacturer of specialty equipment used in the film editing industry. The company needs an income statement for the second quarter of its fiscal year and has requested that you prepare such a statement. Management of the company has provided you with the following information that may be relevant to your engagement:
1. Revenues for the quarter were $510,000. The revenues are traceable to the sale of 2,100 units.
2. The company employs the LIFO inventory method for the following items: beginning inventory of 900 units at a cost of $100 per unit and purchases of 1,500 units at a cost of $120 per unit. It is anticipated that for the fiscal year will exceed the beginning levels of inventory. Furthermore, management anticipates that inventory acquired in the next quarter will cost approximately $124 per unit.
3. Selling, general, and administrative expenses, excluding the items in (4) through (5) below, totaled $110,000 for the quarter.
4. During the quarter, management expended $75,000 for research and development costs, which are expected to provide for new technologies in the coming fiscal year.
5. Management bonuses for the current fiscal year will be approximately $160,000.
6. Based on prior experiences, it is estimated that a year-end physical inventory will reveal that the perpetual inventory is overstated. The adjustment is estimated to be in the range of $30,000.
7. During the second quarter, the company experienced two unrelated extraordinary gains (A and B) in the amount of $20,000 and $15,000, respectively.
The company’s income tax rates are as follows: 15% on the first $50,000 of taxable income, 25% on the next $25,000, 34% on the next $25,000, 39% on the next $230,000, and 34% thereafter. In the first quarter of the fiscal year, the company reported income before taxes of $20,000 and tax expense of $1,000. The company expects that for the last six months of the fiscal year there will be a pretax loss of $40,000 traceable to continuing operations. Annual tax credits will likely amount to $7,000.
Required
Prepare an income statement for the second quarter of the current fiscal year. All supporting schedules should be presented in good form.
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