(Identification of Income Statement Deficiencies) O'Malley Corporation was incorporated and began business on January 1, 2012. It has been successful and now requires a bank loan for additional working capital to finance expansion. The bank has requested an audited income statement for the year 2012. The accountant for O'Malley Corporation provides you with the following income statement which O'Malley plans to submit to the bank.
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O'MALLEY CORPORATION
INCOME STATEMENT
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Sales revenue
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$850,000
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Dividends
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32,300
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Gain on recovery of insurance proceeds from earthquake loss (extraordinary)
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38,500
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920,800
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Less:
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Selling expenses
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$101,100
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Cost of goods sold
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510,000
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Advertising expense
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13,700
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Loss on obsolescence of inventories
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34,000
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Loss on discontinued operations
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48,600
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Administrative expense
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73,400
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780,800
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Income before income tax
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140,000
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Income tax
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56,000
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Net income
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$84,000
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Instructions
Indicate the deficiencies in the income statement presented above. Assume that the corporation desires a single-step income statement.