This is my first time using this site but I am desperate. I am calculating Multiple Step Income Statement and want make sure if everything is in the right place. Did I do this right?


They gave me this information:

Sales 650,000
Purchases discounts 9,000
Purchases 376000
Earthquake loss 57000
Selling Expense 57000
Error in depreciation Expense for 2006 (to correct error, depr. Exp. is reduced) 25000
Accounts receivable 45000
Common Stock 100000
Accumulated Depreciation 87000
Dividend Income 5500
Inventory- January 1,2008+ 76000
Inventory-December 31, 2008 62500
Unearned service Revenue 2000
Accrued interest Payable 500
Land 185000
Patents 50,000
Retained Earning-January 1,2008 195000
Interest Expense (other item) 8500
General and Administrative 70000
Dividends declared 2500
Allowance for doubtful accounts 2500
Notes Payable 100,000
Machinery and Equipment 225,000
Materials and Supplies 20,000
Accounts Payable 30,000
Loss from dicontinued operations 40,0000


The amount of income taxes applicable to income from operations was $62,000. The tax effect of the earthquake loss amounted to $19,000. The tax effect of the discontinued operating loss was $20,000. The tax effect of the depreciation error was $10,000.

This is what I did:

Sales Revenue 65000
Cost of Good Sold:
Inventory-January 1,2008 76000
Purchases 376000
Less: Purchases Discounts (9000)
Net Purchases 367000
Total Inventory available for sale 443000
Less: Inventory-December 31,2008 62500
Cost of Good Sold 380000
Gross Profit on Sales 270000
Operating Expenses:
Selling Expenses 71000
General and Administrative Expenses 70000
Material and Supplies 20000
Total Operating Expenses 161000
Other Income (Expense):
Error in Depreciation Expense for 2006 (25000)
Interest Expense (8500)
Dividend Income (5500)
Income from continuing operations before
income taxes and extraordinary item 133000
Income Tax Expense (62000)
Income from continuing operations
after income taxes 71000

Discontinued Operations:
Loss from discontinued operations (40000)
Income tax benefit 20000
Loss on discontinued operations (20000)
Income before extraordinary item 51000
Extraordinary item
Earthquake loss (57000) -
Net Loss (6000)

santys72

previous years Accounting errors are reported in Retained Earnings. They are reported as adjustement to the beginning balance of retained earnings. Accouting errors are not part of Income from continuing Operations. Accounting errors are treated retrospectively and if comparative financial statements are presented, they need to be restated.

That was the only thing I saw.

carmen2143

Thanks for your help!!