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Unformatted text preview: P5-9 MisclassificationsThe bookkeeper for the Olson Company prepared the following income statement and retained earnings statement for theyear ended December 31, 2010:OLSON COMPANYDecember 31, 2010Expense and Profits StatementSales (net)$196,000 Less: Selling expenses(19,600)Net sales$176,400 Add: Interest revenue2,300 Add: Gain on sale of equipment3,200 Gross sales revenues$181,900 Less: Costs of operationsCost of goods sold$120,100 Correction of overstatement in last years income because of error(net of $1,650 income tax credit)3,850 Dividend costs ($0.50 per share for 8,000 common shares) 4,000 Extraordinary loss because of earthquake (net of $1,800 income tax credit)4,200 (132,150)Taxable revenues$49,750 Less: Income tax on income from continuing operations(12,480)Net income$37,270 Miscellaneous deductionsLoss from operations of discontinued Division L (net of $900 income tax credit)$2,100 Administrative expenses 16,800 16,800 (18,900)Net revenues$18,370 OLSON COMPANYRetained Revenues StatementFor Year Ended December 31, 2010Beginning retained earnings$59,300 Add: Gain on sale of Division L (net of $1,350 income taxes)3,150 Recalculated retained earnings$62,450 Add: Net revenues18,370 $80,820 Less: Interest expense(3,400)Ending retained earnings$77,420...
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This note was uploaded on 07/10/2011 for the course ACCOUNTING 116 - 301 taught by Professor Levine during the Spring '11 term at Kaplan University.
- Spring '11
- Income Statement