Question

Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31) Sales revenue Cost of goods sold Administrative expense Selling expense Interest revenue Interest expense Loss on sale of assets of discontinued component 2021 2020 $5,250,000 $4,350,000 3,030,000 2,170,000 970,000 845,000 530,000 472,000 167,000 157,000 234,000 234,000 116,000 On July 1, 2021, 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, 2021, for $116,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows Sales revenue Cost of goods sold Administrative expense Selling expense Operating income before taxes 1/1/2021-9/30/2021 570,000 (375,00 (67,000 EZ,000 1591,000 2020 5.670,000 (422,000) (57,000) (7.000 $ 154,000 . In addition to the account balances above, several events occurred during 2021 that have not yet been reflected in the above accounts 1. A fire caused $67,000 in uninsured damages to the main office building The fire was considered to be an unusual event 2. Inventory that had cost $57000 had become obsolete because a competitor introduced a better product The inventory was written down to its scrap value of $8.000 3. Income taxes have not yet been recorded

Answer 1

REED COMPANY
COMPARATIVE INCOME STATEMENT
FOR YEAR ENDED 2021
	2021 (in $)	2020 (in $)
Sales Revenue	52,50,000	43,50,000
Cost of goods sold	-30,30,000	-21,70,000
Gross profit (loss)	22,20,000	21,80,000
Operating Expenses :
Administrative	-9,70,000	-8,45,000
Selling	-5,30,000	-4,72,000
Loss from fire damage	-67,000
Loss from write down of obsolete inventory	-49,000
Total Operating expense	-16,16,000	-13,17,000
Operating Income	6,04,000	8,63,000
Other Income (Expense) :
Interest Revenue	1,67,000	1,57,000
Interest Expense	-2,34,000	-2,34,000
Total Other expense (net)	-67,000	-77,000
Income from continuing operations before income tax	5,37,000	7,86,000
Income Tax expense	-1,07,400	-1,57,200
Income from continuing operations	4,29,600	6,28,800
Discontinued Operations :
Income (Loss) from operations of discontinued operations	-25,000	1,54,000
Income tax benefit	5,000	-30,800
Income (Loss) from discontinued operations	-20,000	1,23,200
Net income	4,09,600	7,52,000
Earning per share :
Income from continuing operations	0.51
Discontinued Operations	-0.03
Net Income	0.49