Shown below is an income statement for 2020 that was prepared by a poorly trained bookkeeper of BASCO Corporation. BASCO Corporation INCOME STATEMENT December 31, 2020 Sales revenue $945,000 Interest revenue 19,500 Cost of merchandise sold (408,500) Selling expenses (145,000) Administrative expense (215,000) Interest expense (13,000) Income before special items 183,000 Special items Loss on disposal of a component of the business (30,000) Major casualty loss (extraordinary item) (70,000) Net income $ 83,000 Instructions: Prepare a multiple-step income statement for 2020 for BASCO Corporation, the tax rate 30%.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Shown below is an income statement for 2020 that was prepared by a poorly trained bookkeeper of BASCO Corporation.
BASCO Corporation
INCOME STATEMENT
December 31, 2020
Sales revenue $945,000
Interest revenue 19,500
Cost of merchandise sold (408,500)
Selling expenses (145,000)
Administrative expense (215,000)
Interest expense (13,000)
Income before special items 183,000
Special items
Loss on disposal of a component of the business (30,000)
Major casualty loss (extraordinary item) (70,000)
Net income $ 83,000
Instructions:
Prepare a multiple-step income statement for 2020 for BASCO Corporation, the tax rate 30%.
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