Prepare a multiple-step income statement Prepare a retained earnings statement

Porter Corporation’s capital structure consists of 50,000 shares of common stock.

At December 31, 2010 an analysis of the accounts and discussions with company officials revealed the following information:

Sales                                       $1,100,000

Purchase discounts                 18,000

Purchases                               642,000

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 depreciation       180,000

Dividend revenue                    8,000

Inventory, January 1, 2010     152,000

Inventory, December 31, 2010 125,000

Unearned service revenue      4,400

Accrued interest payable        1,000

Land                                        370,000

Patents                                    100,000

Retained earnings, January 1, 2010          290,000

Interest expense                     17,000

General and administrative expenses 150,000

Dividends declared                 29,000

Allowance for doubtful accounts 5,000

Notes payable (maturity 7/1/13)       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 $48,600, excluding the tax effect of the earthquake loss which amounted to $18,000.

 Instructions (a) Prepare a multiple-step income statement.

(b) Prepare a retained earnings statement.

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