Assume that the Special Contract Division of FedEx Kinko's experienced the following transactions during the year ende
Assume that the Special Contract Division of FedEx Kinko's experienced the following transactions during the year ended December 31, 2017:
a. Suppose the division provided copy services to a customer for the discounted price of $250,000. Under normal conditions, Kinko's would have provided these services for $280,000. Other revenues totaled $50,000.
b. Salaries cost the division $20,000 to provide these services. The division had to pay employees overtime. Ordinarily, the salary cost for these services would have been $18,000.
c. Other expenses totaled $240,000. Income tax expense was 30% of income before tax.
d. FedEx Kinko's has two operating divisions. Each division is accounted for separately to indicate how well each is performing. At year-end, FedEx Kinko's combines the statements of divisions to show results for FedEx Kinko's as a whole.
e. Inflation affects the amounts that FedEx Kinko's must pay for copy machines. To show the effects of inflation, net income would drop by $3,000.
f. If FedEx Kinko's were to go out of business, the sale of its assets would bring in $150,000 in cash.
1. Prepare the Special Contracts Division income statement for the year ended December 31, 2017.
2. As CEO, identify the accounting assumption or characteristics used in accounting for the items described in a through f. State how you have applied the assumption or characteristic in preparing the division income statement?