Sales $1,200,000
Purchase discounts 18,000
Purchases 720,000
Earthquake loss (net of tax) (extraordinary item) 42,000
Selling expenses 128,000
Cash 60,000
Accounts receivable 90,000
Common stock 200,000
Accumulated amortization 180,000
Dividend revenue 18,000
Inventory, January 1, 2006 152,000
Inventory, December 31, 2006 125,000
Unearned service revenue 4,400
Accrued interest payable 1,000
Land 370,000
Patents 100,000
Retained earnings, January 1, 2006 270,000
Interest expense 17,000
Cumulative effect of change from straight-line to accelerated
amortization (net of tax) 35,000
General and administrative expenses 160,000
Dividends declared 29,000
Allowance for doubtful accounts 5,000
Notes payable (maturity 7/1/09) 200,000
Machinery and equipment 450,000
Materials and supplies 40,000
Accounts payable 60,000

The amount of income taxes applicable to ordinary income was $55,200, excluding the tax effect of the earthquake loss which amounted to $18,000 and the tax effect of the change of accounting principle which was $15,000.

a multi-step income statement has different sections:
First is Sales Revenu - COGS = Gross Profit

Next is Operating Expenses = Total operating expenses.

Gross Profit - total Operating Expenses = Operating Income

Next is Other income and expenses = total other income

Operating Income + total other income = Income before taxes

Income tax expense

Income before taxes - Income tax expense = Net Income