The following financial statement was prepared by employees of Walters Corporation. Walters Corporation Income Statement Year Ended December 31, 2020
The following financial statement was prepared by employees of Walters Corporation. Walters Corporation Income Statement Year Ended December 31, 2020
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 | |||
|
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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