Reference no: EM132891672

Question - Assume that the Special Contract Division of Staples experienced the following transactions during the year ended December 31, 2020:

a. Suppose the division provided copy services to a customer for the discounted price of $250,000. Under normal conditions, Staples would have provided these services for $280,000. Other revenues totalled $50,000.

b. Salaries cost the division $20,000 to provide these services. The division had to pay employees overtime. Ordinarily, the salary cost for these services would have been $18,000.

c. Other expenses totalled $240,000. Income tax expense was 30% of income before tax.

d. Staples has two operating divisions. Each division is accounted for separately to indicate how well each is performing. At year-end, Staples combines the statements of divisions to show results for Staples as a whole.

e. Inflation affects the amounts that Staples must pay for copy machines. To show the effects of inflation, net income would drop by $3,000.

f. If Staples were to go out of business, the sale of its assets would bring in $150,000 in cash.

Requirements -

1. Prepare the Special Contracts Division's income statement for the year ended December 31, 2020.

2. Identify the accounting concepts, assumptions, or principles used in accounting for the items described in a through f. State how you have applied the concept, assumption, or principle in preparing the Division's income statement.