Reference no: EM13387227
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 $ 4,950,000 $ 4,050,000
Cost of goods sold 2,970,000 2,110,000
Administrative expenses 910,000 785,000
Selling expenses 470,000 422,000
Interest revenue 161,000 151,000
Interest expense 222,000 222,000
Loss on sale of assets of discontinued component 94,000 -
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 $94,000 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 $ 510,000 $ 610,000
Cost of goods sold (345,000 ) (386,000 )
Administrative expenses (61,000 ) (51,000 )
Selling expenses (31,000 ) (41,000 )
Operating income before taxes $ 73,000 $ 132,000
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 $61,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.
2. An earthquake caused $111,000 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 $51,000 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 400,000 shares of common stock. (Amounts to be deducted should be indicated with a minus sign.Round EPS answers to 2 decimal places.)