Reference no: EM131253641

Selected information about income statement accounts for the Reed Company are presented below (the company's fiscal year ends on December 31):

2011 / 2010

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, 2011, 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, 2011 for $50,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:

1/1/11-9/30/11 / 2010

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 2011 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.

3. Inventory that had cost $40,000 had become obsolete because a competitor introduced a better product. The inventory was sold for $5,000.

4. Income taxes have not yet been accrued.

Required:

Prepare a multiple-step income statement for the Reed Company for 2011, showing 2010 information in comparative format, including income taxes computed at 40% and EPS disclosures assuming 300,000 shares of common stock.