Accrual-based income statement for 2011, Financial Accounting

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The Wanless Corporation provides Internet consulting services to a wide-range of customers. The company's fiscal year ends on December 31. For the year ended December 31, 2011, the company collected $1,300,000 from regular customers and paid out $650,000 for various operating expenses (not including income taxes and restructuring costs). The following information also is available.

Partial balance sheet information:
12/31/11 12/31/10
Accounting receivable 120,000 95,000
Accounts payable (for operating expenses) 50,000 65,000

Additional facts:
1. Depreciation expense for 2011 totaled $70,000.

2. There were no bad debt write offs during the year.

3. During the year, the company incurred a loss of $100,000 from hurricane damage to one of its buildings. The loss is material and the event is considered to be unusual and infrequent.

4. On December 31, 2011, a piece of land that the company purchased as an investment was sold for $400,000. The land cost Wanless $160,000. Terms of the sale were as follows: $50,000 down payment and the remainder to be paid in seven equal annual installments of $50,000 (plus interest) due each December 31, beginning December 31, 2012. Because of the uncertainty surrounding the collection of the installment receivable, the company decided to use the installment sales method to recognize gain on sale of the land. The gain is not considered extraordinary.

5. The company incurred restructuring costs of $200,000 in 2011, all of which were paid in cash as of year-end. The cash payment is in addition to the $650,000 paid for other operating expenses.

6. The company's income tax rate is 40% on all items of income or loss.

Required: (Show all computations): Prepare a multiple-step, accrual-based income statement for 2011 applying generally accepted accounting principles. Wanless Corporation is a publicly traded corporation with 100,000 shares of common stock outstanding throughout the year.


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