Question

In 2017, Randa Merchandising, Inc., sold its interest in a chain of wholesale outlets, taking the company completely out of the wholesaling business. The company still operates its retail outlets. Indicate where each of the following income-related items for this company appears on its 2017 income statement.

1. Net sales
2. Gain on state's condemnation of company property, net of tax
3. Cost of goods sold
4. Income taxes expense
5. Depreciation expense
6. Gain on sale of wholesale business segment, net of tax
7. Loss from operating wholesale business segment, net of tax
8. Loss of assets from a meteor strike, net of tax

Required:
Prepare the income statement for the calendar year 2017.

Answer 1

The income statement for Randa Merchandising, Inc. for the calendar year 2017 includes various income-related items such as net sales, gain on sale of wholesale business, cost of goods sold, income taxes expense, depreciation expense, gain on state's condemnation of company property, loss from operating wholesale business, and loss of assets from a meteor strike.

Step-by-step explanation:

Income Statement for Randa Merchandising, Inc. for the Calendar Year 2017

Net sales: Net sales would appear as the first line item on the income statement. This represents the total amount of sales generated by the company's retail outlets.

Gain on sale of wholesale business segment, net of tax: This gain would be reported as a separate line item on the income statement. It represents the income generated from selling the company's interest in the wholesale business.

Cost of goods sold: The cost of goods sold is the cost incurred by the company to produce or purchase the goods that are sold through its retail outlets. It would be reported as a line item on the income statement.

Income taxes expense: The income taxes expense represents the amount of taxes owed by the company on its taxable income. It would be reported as a separate line item on the income statement.

Depreciation expense: Depreciation expense represents the allocation of the cost of the company's assets over their useful lives. It would be reported on the income statement as an expense.

Gain on state's condemnation of company property, net of tax: This gain represents the income generated from the state's condemnation of the company's property, net of tax. It would be reported as a separate line item on the income statement.

Loss from operating wholesale business segment, net of tax: This loss would be reported as a separate line item on the income statement. It represents the loss incurred from operating the wholesale business segment.

Loss of assets from a meteor strike, net of tax: This loss would be reported as a separate line item on the income statement. It represents the loss of assets due to the meteor strike.