question archive Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):     2018   2017 Sales $ 4,400,000 $ 3,500,000 Cost of goods sold   2,860,000   2,000,000 Administrative expenses   800,000   675,000 Selling expenses   360,000   312,000 Interest revenue   150,000   140,000 Interest expense   200,000   200,000 Loss on sale of assets of discontinued component   50,000   —   On July 1, 2018, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP

Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):     2018   2017 Sales $ 4,400,000 $ 3,500,000 Cost of goods sold   2,860,000   2,000,000 Administrative expenses   800,000   675,000 Selling expenses   360,000   312,000 Interest revenue   150,000   140,000 Interest expense   200,000   200,000 Loss on sale of assets of discontinued component   50,000   —   On July 1, 2018, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP

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Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):

    2018   2017
Sales $ 4,400,000 $ 3,500,000
Cost of goods sold   2,860,000   2,000,000
Administrative expenses   800,000   675,000
Selling expenses   360,000   312,000
Interest revenue   150,000   140,000
Interest expense   200,000   200,000
Loss on sale of assets of discontinued component   50,000  
 


On July 1, 2018, 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, 2018, for $50,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:

  1/1/18-9/30/18   2017  
Sales   $ 400,000       $ 500,000  
Cost of goods sold     (290,000 )       (320,000 )
Administrative expenses     (50,000 )       (40,000 )
Selling expenses     (20,000 )       (30,000 )
Operating income before taxes   $ 40,000       $ 110,000  
 


In addition to the account balances above, several events occurred during 2018 that have not yet been reflected in the above accounts:

A fire caused $50,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.

Inventory that had cost $40,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $5,000.

Income taxes have not yet been recorded.


Required:
Prepare a multiple-step income statement for the Reed Company for 2018, showing 2017 information in comparative format, including income taxes computed at 40% and EPS disclosures assuming 300,000 shares of common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)

 
 
REED COMPANY
Comparative Income Statements
For the Years Ended December 31
  2018 2017
Sales revenue $4,000,000 $3,000,000
Cost of goods sold 2,570,000 1,680,000
Gross profit (loss) 1,430,000 1,320,000
Operating expenses:    
Administrative 750,000 635,000
Selling 340,000 282,000
Loss from fire damage 50,000  
Loss from write-down of obsolete inventory 35,000  
Total operating expenses 1,175,000 917,000
Operating income 255,000 403,000
Other income (expense):    
Interest revenue 150,000 140,000
Interest expense (200,000) (200,000)
Total other expenses (net) (50,000) (60,000)
Income from continuing operations before income taxes 205,000 343,000
Income tax expense 82,000 137,200
Income from continuing operations 123,000 205,800
Discontinued operations:    
Income (loss) from operations of discontinued component    
Income tax benefit (expense)    
Income (loss) on discontinued operations    
Net income    
Earnings per share:    
Income from continuing operations $0.41 $0.69
Discontinued operations    
Net income    

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