Addison Corporation is currently going through a Chapter 11

Addison Corporation is currently going through a Chapter 11 bankruptcy. The company has the following account balances for the current year.

  

Debit

Credit

  Advertising expense

$

39,000

  Cost of goods sold

226,000

  Depreciation expense

37,000

  Interest expense

3,000

  Interest revenue

$

37,000

  Loss on closing of branch

124,000

  Professional fees

86,000

  Rent expense

31,000

  Revenues

572,000

  Salaries expense

85,000

  

Prepare an income statement for this organization. The effective tax rate is 30 percent (realization of any tax benefits is anticipated). (Negative amounts under \"Reorganization items\" should be indicated by a minus sign.)

The income statement is broken into

Cost and expenses

Earnings before reorganization items and tax effects and Reorganizations items

List of Accounts include

Advertising expense

Cost of goods sold

Depreciation expense

Income tax benefit

Interest expense

Interest revenue

Loss on closing of branch

Professional fees

Rent expense

Revenues

Salaries

Addison Corporation is currently going through a Chapter 11 bankruptcy. The company has the following account balances for the current year.

Solution

Addison Corporation Income Statement Revenues          572,000.0 Costs & Expenses: Cost of Goods Sold          226,000.0 Rent Expense             31,000.0 Salaries Expense             85,000.0 Depreciation Expense             37,000.0 Advertising Expense             39,000.0 Interest Expense               3,000.0          421,000.0 Earnings before reorganization items and tax effects          151,000.0 Reorganization Items: Loss on Closing of Branch        (124,000.0) Professional Fees          (86,000.0) Interest Revenue             37,000.0        (173,000.0) Loss before Income Tax Benefit          (22,000.0) Tax Benefits - $22,000 X 30%               6,600.0 Net Loss          (15,400.0)