Reference no: EM13578493

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 $ 5,050,000 $ 4,150,000 Cost of goods sold 2,990,000 2,130,000 Administrative expenses 930,000 805,000 Selling expenses 490,000 442,000 Interest revenue 163,000 153,000 Interest expense 226,000 226,000 Loss on sale of assets of discontinued component 102,000 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 $102,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: 1/1/13-9/30/13 2012 Sales $ 530,000 $ 630,000 Cost of goods sold (355,000 ) (398,000 ) Administrative expenses (63,000 ) (53,000 ) Selling expenses (33,000 ) (43,000 ) Operating income before taxes $ 79,000 $ 136,000 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 $63,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.

2. An earthquake caused $113,000 in property damage to one of Reeds factories. The amount of the loss is material and the event is considered unusual and infrequent.

3. Inventory that had cost $53,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $4,000.

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 500,000 shares of common stock.