Addison Corporation is currently going through a Chapter 11 bankruptcy. The comp

Question

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 $ 38,000 Cost of goods sold 225,000 Depreciation expense 36,000 Interest expense 2,000 Interest revenue $ 36,000 Loss on closing of branch 123,000 Professional fees 85,000 Rent expense 30,000 Revenues 565,000 Salaries expense 84,000 Prepare an income statement for this organization. The effective tax rate is 20 percent (realization of any tax benefits is anticipated). (Negative amounts under "Reorganization items" should be indicated by a minus sign.)

ADDISON CORPORATION

Income Statement

Costs and Expenses:

Earnings before reorganization items and tax effects: $

Reorganization items

$

Explanation / Answer

ADDISON CORPORATION

Income Statement

Revenue $565000 Interest Revenue 36000 Total Revenue 601000 Less: Cost of goods sold 225000 Gross Profit 376000 Less: Expenses: Advertising Expenses 38000 Depreciation Expenses 36000 Interest Expenses 2000 Professional Fees 85000 Rent Expenses 30000 Salaries Expenses 84000 Total Expenses 275000 Operating Income 101000 Less: Reorganization items: Loss on Closing of branch (123000) Net Operating Income (Loss) ($22000)

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