Maurice Tutor
$15/per page/Negotiable
(Identification of Income Statement Weaknesses) The following financial statement was prepared by employees of Walters Corporation.
|
WALTERS CORPORATION |
|
|
Revenues |
 |
|
Gross  sales, including sales taxes |
$1,044,300 |
|
Less: Â Returns, allowances, and cash discounts |
56,200 |
|
Net  sales |
988,100 |
|
Dividends, Â interest, and purchase discounts |
30,250 |
|
Recoveries  of accounts written off in prior years |
13,850 |
|
Total  revenues |
1,032,200 |
|
Costs  and expenses |
 |
|
Cost of  goods sold, including sales taxes |
465,900 |
|
Salaries  and related payroll expenses |
60,500 |
|
Rent |
19,100 |
|
Freight-in  and freight-out |
3,400 |
|
Bad debt  expense |
27,800 |
|
Total  costs and expenses |
576,700 |
|
Income  before extraordinary items |
455,500 |
|
Extraordinary  items |
 |
|
Loss on  discontinued styles |
71,500 |
|
Loss on  sale of marketable securities |
39,050 |
|
Loss on  sale of warehouse |
86,350 |
|
Total  extraordinary items |
196,900 |
|
Net  income |
$258,600 |
|
Net  income per share of common stock |
$2.30 |
New styles and rapidly changing consumer preferences resulted in a $71,500 loss on the disposal of discontinued styles and related accessories.
The corporation sold an investment in marketable securities at a loss of $39,050. The corporation normally sells securities of this nature.
The corporation sold one of its warehouses at an $86,350 loss.
Instructions
Identify and discuss the weaknesses in classification and disclosure in the single-step income statement above. You should explain why these treatments are weaknesses and what the proper presentation of the items would be in accordance with GAAP.