Question

The information below relates to the operations of Crane Corporation, a private company following ASPE, for the year ended December 31, 2020:

Cost of goods sold $345,000  
Interest expense 2,430  
Sales returns and allowances 8,850  
Accounts payable 120,058  
Sales discounts 3,852  
Depreciation expense 284,480  
Sales revenue 982,596  
Salaries and wages expense   163,612  
Prepaid expenses   3,470  
Rent expense 36,500  
Loss from fire 8,198  
Rental revenue 25,506  

Additional information:

•		The effective tax rate is 40%.
•		Depreciation expense: 50% administrative expense and 50% selling expense
•		Salaries and wages expense: 45% administration expense and 55% selling expense
•		Rent expense: 70% administration expense and 30% selling expense

Prepare a multiple-step income statement in good form by function. (Enter selling expenses before administrative expenses. Round answers to 0 decimal places, e.g. 5,275.)

Answer 1

The income statement by function is shown below
CRANE CORPORATION
Income statement for the year ended December 31, 2020
Sales revenue			$982,596
Sales returns and allowances			-$8,850
Sales discounts			-$3,852
Net sales			$969,894
Cost of goods sold			-$345,000
Gross profit			$624,894
Operating expenses
Administrative expense
Depreciation expense	$142,240
Salaries and wages expense	$73,625
Rent expense	$25,550	$241,415
Selling expense
Depreciation expense	$142,240
Salaries and wages expense	$89,987
Rent expense	$10,950	$243,177
Total operating expense			-$484,592
Operating income			$140,302
Non operating income(expense)
Rental revenue		$25,506
Interest expense		-$2,430	$23,076
Income before taxes and extraordinary items			$163,378
Taxes @ 40%			-$65,351
Income before extraordinary item			$98,027
Extraordinary item
Loss from fire, net of taxes			-$4,919
Net income			$93,108