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(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.
O'MALLEY CORPORATION INCOME STATEMENT
Sales revenue
$850,000
Dividends
32,300
Gain on recovery of insurance proceeds from earthquake loss (extraordinary)
38,500
920,800
Less:
Selling expenses
$101,100
Cost of goods sold
510,000
Advertising expense
13,700
Loss on obsolescence of inventories
34,000
Loss on discontinued operations
48,600
Administrative expense
73,400
780,800
Income before income tax
140,000
Income tax
56,000
Net income
$84,000
Instructions
Indicate the deficiencies in the income statement presented above. Assume that the corporation desires a single-step income statement.
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