The following financial statement was prepared by employees of ­Walters Corporation. Walters Corporation Income Statement Year Ended December 31, 2020

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The following financial statement was prepared by employees of ­Walters Corporation.

Walters Corporation
Income Statement
Year Ended December 31, 2020
  Revenues      
   Gross sales, including sales taxes   $1,044,300  
   Less: Returns, allowances, and cash discounts       56,200  
    Net sales   988,100  
  Dividends, 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  
   Delivery expense and freight-in   3,400  
  Bad debt expense       27,800  
    Total costs and expenses      576,700  
  Income before other items      455,500  
  Other items      
   Loss on discontinued styles (Note 1)   71,500  
   Loss on sale of marketable securities (Note 2)   39,050  
   Loss on sale of warehouse (Note 3)       86,350  
    Total other items      196,900  
  Net income   $  258,600  
  Net income per share of common stock   $2.30  
Note 1: New styles and rapidly changing consumer preferences resulted in a $71,500 loss on the disposal of discontinued styles and related accessories.
Note 2: The corporation sold an investment in marketable securities at a loss of $39,050. The corporation ­normally sells securities of this nature.
Note 3: The corporation sold one of its warehouses at an $86,350 loss.

Q: 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.

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