Preparing an income statement
Excerpts from Crozier Industries” financial records
|
Debit |
Credit |
|
|
Sales |
977,000 |
|
|
Sales returns |
9,000 |
|
|
Costs of goods sold |
496,000 |
|
|
Dividends |
50,000 |
|
|
Rent expense |
90,000 |
|
|
Wages payable |
175,000 |
|
|
Loss on sale of food services division |
2,000 |
|
|
Loss incurred by food services division |
10,000 |
|
|
Depreciation expense |
100,000 |
|
|
Cumulative effect on income of change in fixed asset accounting |
130,000 |
|
|
Cain on land appropriated by the government |
92,000 |
|
|
Insurance expense |
12,000 |
|
|
Inventory |
576,000 |
|
|
Administrative expenses |
109,000 |
|
|
Prepaid insurance |
48,000 |
|
|
Gain on sale of short-term investments |
142,000 |
The amounts shown do not include any tax effects. Crozier”s tax rate is 35 percent. Assume that all items are treated the same for accounting and income tax purposes.
REQUIRED:
a. Indicate which items should be included on the company”s income statement. Classify each item to be included on the income statement as one of the following:
(1) Usual and frequent
(2) Unusual or infrequent
(3) Disposal of business segment
(4) Unusual and infrequent
(5) Mandated change in accounting method
b. Prepare an income statement using the single-step format, and assess the persistence of each item on the income statement.