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:
Purchase discounts 18,000
Earthquake loss (net of tax) (extraordinary item) 42,000
Selling expenses 128,000
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
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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