Selected information about income statement accounts for theReed Company is presented below (the company's fiscal year ends onDecember 31): 2018 2017 Sales $ 4,600,000 $ 3,700,000 Cost of goodssold 2,900,000 2,040,000 Administrative expenses 840,000 715,000Selling expenses 400,000 352,000 Interest revenue 154,000 144,000Interest expense 208,000 208,000 Loss on sale of assets ofdiscontinued component 66,000 — On July 1, 2018, the companyadopted a plan to discontinue a division that qualifies as acomponent of an entity as defined by GAAP. The assets of thecomponent were sold on September 30, 2018, for $66,000 less thantheir book value. Results of operations for the component (includedin the above account balances) were as follows: 1/1/18-9/30/18 2017Sales $ 440,000 $ 540,000 Cost of goods sold (310,000 ) (344,000 )Administrative expenses (54,000 ) (44,000 ) Selling expenses(24,000 ) (34,000 ) Operating income before taxes $ 52,000 $118,000 In addition to the account balances above, several eventsoccurred during 2018 that have not yet been reflected in the aboveaccounts: A fire caused $54,000 in uninsured damages to the mainoffice building. The fire was considered to be an infrequent butnot unusual event. Inventory that had cost $44,000 had becomeobsolete because a competitor introduced a better product. Theinventory was sold as scrap for $7,000. Income taxes have not yetbeen recorded. Required: Prepare a multiple-step income statementfor the Reed Company for 2018, showing 2017 information incomparative format, including income taxes computed at 40% and EPSdisclosures assuming 500,000 shares of common stock
