The information below is for the second quarter of Tampa Company for 20X8: Revenues of 2nd quarter$18,000,000 Cost of sales (includes the replacement cost of the LIFO inventory liquidated) 12,400,000 Cost of sales (does not include the replacement cost of the LIFO inventory liquidated) 11,600,000 Operating expenses for 2nd quarter 3,000,000 Estimated annual repairs and property taxes (not included in the operating expenses for the 2nd quarter) 600,000 Loss from early extinguishment of debt (not material in relation to the expected annual income) 500,000 Income tax expense, 1st quarter 350,000 Income before tax, 1st quarter 1,000,000 Effective annual income tax rate 30% Required:Prepare an interim income statement for
the second quarter for Tampa Company. Assume the LIFO liquidation is expected to be restored by the end of 20X8.
What will be an ideal response?
Income statement for the second quarter for Tampa Company:
| Revenues | $ | 18,000,000 | |||||
| Cost of sales | $ | 12,400,000 | |||||
| Operating expenses | 3,000,000 | ||||||
| Repairs and property tax expenses ($600,000/4) | 150,000 | ($ | 15,550,000 | ) | |||
| Net Operating Income | 2,450,000 | ||||||
| Nonoperating Item: | |||||||
| Loss from early extinguishment of debt | (500,000 | ) | |||||
| Income from continuing operations before tax | $ | 1,950,000 | |||||
| Income taxes | (535,000 | ) | |||||
| Income for the second quarter | $ | 1,415,000 | |||||
Note: Cost of sales was $12,400,000 because the LIFO liquidation was expected to be restored by the end of 20X8. Income tax expense for the second quarter is calculated on cumulative income before tax for the first two quarters and then net of income tax expense from the first quarter.
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