The following financial statement was prepared by employees of Walters Corporation.Walters CorporationIncome StatementYear 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.

Income statement of Walter Corporation for the year ended 31st Dec 2012 Particulars Amount Rev…

Answered: The following financial statement was…

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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