Presented below is information which relates to Labrador Limited for 2017:
Collections of credit sales……………………………………………………………………….. $1,100,000
Retained earnings, January 1, 2017…………………………………………………………. 800,000
Sales……………………………………………………………………………………………………. 1,900,000
Selling and administrative expenses…………………………………………………………. 290,000
Casualty loss (pre-tax)……………………………………………………………………………. 350,000
Cash dividends declared on common stock……………………………………………….. 34,000
Cost of goods sold…………………………………………………………………………………. 1,100,000
Loss resulting from calculation error on depreciation charge in 2015 (pre-tax).. 460,000
Other revenues……………………………………………………………………………………… 180,000
Other expenses……………………………………………………………………………………… 120,000
Loss from early extinguishment of debt (pre-tax)………………………………………… 340,000
Gain from transactions in foreign currencies (pre-tax)…………………………………. 220,000
Proceeds from sale of Strathroy common shares……………………………………….. 60,000
Additional information:
1. Early in 2017, Labrador changed depreciation methods for its plant assets from the double declining-balance to the straight-line method. The affected assets were purchased at the beginning of 2015 for $200,000, had no residual value, and had useful lives of 10 years. Depreciation expense of $20,000 is included in the “Selling and Administrative Expenses” of $290,000.
2. On September 1, 2017, Labrador sold one of its segments (product line) to Best Industries for a gain (pre-tax) of $550,000. During the period January 1 to August 31, the discontinued segment incurred an operating loss (pre-tax) of $480,000. This loss is not included in any of the numbers shown above.
3. Included in “Selling and Administrative Expenses” is “Bad Debts Expense” of $19,000. Labrador bases its bad debts expense upon a percentage of sales. In 2015 and 2016, the percentage was 0.5 %. In 2017, the percentage was changed to 1%.
Instructions
In good form, prepare a multiple-step income statement for 2017. Assume a 20% income tax rate and that 20,000 common shares were outstanding during the year.
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