Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):
| |
2016 |
|
2015 |
| Sales |
$ |
4,500,000 |
$ |
3,600,000 |
| Cost of goods sold |
|
2,880,000 |
|
2,020,000 |
| Administrative expenses |
|
820,000 |
|
695,000 |
| Selling expenses |
|
380,000 |
|
332,000 |
| Interest revenue |
|
152,000 |
|
142,000 |
| Interest expense |
|
204,000 |
|
204,000 |
| Loss on sale of assets of discontinued component |
|
58,000 |
|
- |
On July 1, 2016, 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, 2016, for $58,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:
| 1/1/16-9/30/16 |
|
2015 |
|
| Sales |
|
$ |
420,000 |
|
$ |
520,000 |
|
| Cost of goods sold |
|
|
(300,000 |
) |
|
(332,000 |
) |
| Administrative expenses |
|
|
(52,000 |
) |
|
(42,000 |
) |
| Selling expenses |
|
|
(22,000 |
) |
|
(32,000 |
) |
| |
|
| Operating income before taxes |
|
$ |
46,000 |
|
$ |
114,000 |
|
In addition to the account balances above, several events occurred during 2016 that have not yet been reflected in the above accounts:
1. A fire caused $52,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.
2. Inventory that had cost $42,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $5,000.
3. Income taxes have not yet been recorded.
Required:
Prepare a multiple-step income statement for the Reed Company for 2016, showing 2015 information in comparative format, including income taxes computed at 40% and EPS disclosures assuming 300,000 shares of common stock