PREPARATION OF AN INCOME STATEMENT

 

Starting with the subtotal “Income from Continuing Operations before Income Tax,” complete the income statement for Sigma Shoes, Inc. using the following information.

 

1.   Sigma’s income from continuing operations before income tax is $1.65 million.

 

2.   Sigma’s income tax rate is 40%.

 

3.   During the year, Sigma sold its casual shoe division so that the company could concentrate on athletic shoes.  The casual shoe division had a $30,000 net loss for the year prior to its sale.  Sigma realized a $195,000 gain on the sale of the division.

 

4.   A flash flood destroyed $70,000 worth of inventory in one of Sigma’s warehouses.

 

5.   Sigma decided to change from straight-line to declining-balance depreciation.  If declining-balance depreciation had been used in prior years, Sigma would have recorded an additional $280,000 in accumulated depreciation.