WALTERS CORPORATION
INCOME STATEMENT
YEAR ENDED DECEMBER 31, 2010
Revenues
Gross sales, including sales taxes $1,044,300
Less: Returns, allowances, and cash discounts 56,200
Net sales 988,100
Dividends, interest, and purchase discounts 30,250
Recoveries of accounts written off in prior years 13,850
Total revenues 1,032,200
Costs and expenses
Cost of goods sold, including sales taxes 465,900
Salaries and related payroll expenses 60,500
Rent 19,100
Freight-in and freight-out 3,400
Bad debt expense 27,800
Total costs and expenses 576,700
Income before extraordinary items 455,500
Extraordinary items
Loss on discontinued styles (Note 1) 71,500
Loss on sale of marketable securities (Note 2) 39,050
Loss on sale of warehouse (Note 3) 86,350
Total extraordinary items 196,900
Net income $ 258,600
Net income per share of common stock $2.
Note 1: New styles and rapidly changing consumer preferences resulted in a $71,500 loss on the disposal of discontinued styles and related accessories.
Note 2: The corporation sold an investment in marketable securities at a loss of $39,050. The corporation normally sells securities of this nature.
Note 3: The corporation sold one of its warehouses at an $86,350 loss.
Instructions:
Identify and discuss the weaknesses in classification and disclosure in the single-step income statement above. You should explain why these treatments are weaknesses and what the proper presentation of the items would be in accordance with GAAP.