Multiple-Step Income Statement
Presented Below Is Information That Relates to Muffin

question 81

Essay

Multiple-step income statement
Presented below is information that relates to Muffin Limited for 2020:
$\begin{array}{llcc} \text { Collections of credit sales...........................................} &\$1,100,000 \\ \text { Retained earnings, January 1, 2020............................. } &800,000\\ \text { Sales............................................................................ } &1,900,000\\ \text { Selling and administrative expenses............................. } &290,000\\ \text {Casualty loss (pre-tax).................................................. } &350,000\\ \text { Cash dividends declared on common shares...................} &34,000\\ \text {Cost of goods sold........................................................... } &1,100,000 \\ \text {Loss resulting from calculation error on depreciation charge in 2018 (pre-tax)........ } &460,000\\ \text {Other revenues.............................................................. } &180,000\\ \text {Other expenses............................................................... } &120,000\\ \text {Loss from early extinguishment of debt (pre-tax)........... } &340,000\\ \text {Gain from transactions in foreign currencies (pre-tax)....... } &220,000\\ \text {Proceeds from sale of Muffin common shares...................... } &60,000\\\end{array}$

Additional information:
1. Early in 2020, Muffin changed depreciation methods for its plant assets from the double- declining-balance to the straight-line method. The affected assets were purchased at the beginning of 2015 for $200,000, had no residual value, and had useful lives of 10 years. Depreciation expense of $20,000 is included in the selling and administrative expenses of $290,000.
2. On September 1, 2020, Muffin sold one of its segments (product line) to Best Industries for a gain (pre-tax) of $550,000. During the period January 1 to August 31, the discontinued segment incurred an operating loss (pre-tax) of $480,000. This loss is not included in any of the numbers shown above.
3. Included in selling and administrative expenses is bad debts expense of $19,000. Muffin bases its bad debts expense upon a percentage of sales. In 2018 and 2019, the percentage was 0.5 %. In 2020, the percentage was changed to 1%.
Instructions
In good form, prepare a multiple-step income statement for 2020. Assume a 20% income tax rate and that 20,000 common shares were outstanding during the year.

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Definitions:

Organizational Outcomes

The results or consequences of an organization's actions, strategies, and processes, often measured in terms of performance, productivity, and employee satisfaction.

Scrutinized

Examined or inspected closely and thoroughly.

Moral Dimension

Aspects of decision making and behavior guided by ethical principles and values.

Relational-Based Approach

A strategy or method that emphasizes the importance of relationships and interactions between individuals or groups.