Question

just review the accounting question and if needed correct

Presented below is information which relates to Labrador Limited for 2017:

      Collections of credit sales...................................................................................       $1,100,000

      Retained earnings, January 1, 2017...................................................................    800,000

      Sales................................................................................................................... 1,900,000

      Selling and administrative expenses...................................................................    290,000

      Casualty loss (pre-tax)........................................................................................    350,000

      Cash dividends declared on common stock........................................................      34,000

      Cost of goods sold.............................................................................................. 1,100,000

      Loss resulting from calculation error on depreciation charge in 2015 (pre-tax)..    460,000

      Other revenues...................................................................................................    180,000

      Other expenses...................................................................................................    120,000

      Loss from early extinguishment of debt (pre-tax)................................................    340,000

      Gain from transactions in foreign currencies (pre-tax)........................................    220,000

      Proceeds from sale of Strathroy common shares...............................................      60,000

Additional information:

1.   Early in 2017, Labrador changed depreciation methods for its plant assets from the double declining-balance to the straight-line method. The affected assets were purchased at the beginning of 2015 for $200,000, had no residual value, and had useful lives of 10 years. Depreciation expense of $20,000 is included in the "Selling and Administrative Expenses" of $290,000.

2.   On September 1, 2017, Labrador sold one of its segments (product line) to Best Industries for a gain (pre-tax) of $550,000. During the period January 1 to August 31, the discontinued segment incurred an operating loss (pre-tax) of $480,000. This loss is not included in any of the numbers shown above.

3.   Included in "Selling and Administrative Expenses" is "Bad Debts Expense" of $19,000. Labrador bases its bad debts expense upon a percentage of sales. In 2015 and 2016, the percentage was 0.5 %. In 2017, the percentage was changed to 1%.

Instructions

In good form, prepare a multiple-step income statement for 2017. Assume a 20% income tax rate and that 20,000 common shares were outstanding during the year.

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Answer 1

Income statement
Sales		$ 1,900,000.00
COGS		$ 1,100,000.00
Gross profit		$      800,000.00
selling and admn		$      290,000.00
operating income		$      510,000.00
other revenues and gains
other revenues	$    180,000.00
Gain from transaction in foreign currency	$    220,000.00	$      400,000.00
		$      910,000.00
Other expenses and losses
Other expenses	$    120,000.00
early extinguishment of debt	$    340,000.00
casualty loss	$    350,000.00	$      810,000.00
income from continuing operations before tax		$      100,000.00
income tax		$        20,000.00
income from continuing operations		$        80,000.00
Discontinued operations
Loss from operations (net of taxes of 96000)	$ (384,000.00)
gain from sale of assets (net of taxes 110000)	$    440,000.00	$        56,000.00
net income		$      136,000.00
Earnings per share
income from continuing operations	(80000/20000)	$                   4.00
discontinued operations	(56000/20000)	$                   2.80
net income		$                   6.80

note:

a.     Loss resulting from calculation error on depreciation charge is a prior period expense , will go retained earnings , not current year income statement

b. dep expense and bad debts are part of selling and admn. costs hence those two adjustments do not affect the given selling and admn. expense in any manner