Question

Selected information about income statement accounts for theReed Company is presented below (the company's fiscal year ends onDecember 31):

	2013			2012
Sales	$	5,200,000		$	4,300,000
Cost of goods sold		3,020,000			2,160,000
Administrative expenses		960,000			835,000
Selling expenses		520,000			472,000
Interest revenue		166,000			156,000
Interest expense		232,000			232,000
Loss on sale of assets of discontinued component		114,000			—

On July 1, 2013, the company adopted a plan to discontinue adivision that qualifies as a component of an entity as defined byGAAP. The assets of the component were sold on September 30, 2013,for $114,000 less than their book value. Results of operations forthe component (included in the above account balances)were as follows:

	1/1/13-9/30/13			2012
Sales	$	560,000		$	660,000
Cost of goods sold		(370,000	)		(416,000	)
Administrative expenses		(66,000	)		(56,000	)
Selling expenses		(36,000	)		(46,000	)
Operating income before taxes	$	88,000		$	142,000

In addition to the account balances above, several eventsoccurred during 2013 that have not yet been reflected inthe above accounts:
1.	A fire caused $66,000 in uninsured damages to the main officebuilding. The fire was considered to be an infrequent but notunusual event.
2.	An earthquake caused $116,000 in property damage to one ofReed’s factories. The amount of the loss is material and the eventis considered unusual and infrequent.
3.	Inventory that had cost $56,000 had become obsolete because acompetitor introduced a better product. The inventory was sold asscrap for $7,000.
4.	Income taxes have not yet been accrued.

Required:

Prepare a multiple-step income statement for the Reed Companyfor 2013, showing 2012 information in comparative format, includingincome taxes computed at 40% and EPS disclosures assuming 500,000shares of common stock. (Amounts to be deducted should beindicated with a minus sign.Round EPS answers to 2 decimalplaces.)