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 $4,400,000 $3,500,000
- Cost of goods sold 2,860,000 2,000,000
- Administrative expenses 800,000 675,000
- Selling expenses 360,000 312,000
- Interest revenue 150,000 140,000
- Interest expense 200,000 200,000
- Loss on sale of assets of discontinued component 50,000 -
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 $50,000 less than their book value. Results of operations for the component ( included in the above account balances) were as follows:
- Sales $400,000 $500,000
- Cost of goods sold (290,000) (320,000)
- Administrative expenses (50,000) (40,000)
- Selling expenses (20,000) (30,000)
- Operating income before taxes $ 40,000 $110,000
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 $50,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.
2. An earthquake caused $100,000 in property damage to one of Reed's factories. The amount of the loss is material and the event is considered unusual and infrequent.
3. Inventory that had cost $40,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap 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 300,000 shares of common stock.