Good Time, Inc

Essay

Good Time, Inc. is a worldwide manufacturer of toys and games. In accordance with generally accepted accounting principles, quarterly statements are prepared. At the end of the first quarter of 20X2, the following data have been collected from the financial records:
a.
Sales were $14,680,000.
b.
Expenses related directly to the sales were $10,600,000, of which $9,500,000 related to the cost of goods sold.
c.
Good Time, Inc. employs the LIFO method for inventory valuation and has liquidated a portion of its beginning inventory. The liquidation was in the amount of $600,000, which is included in the cost of goods sold of $9,500,000, and the cost to replace this inventory will be $1,400,000.
d.
Other transactions during the first quarter were as follows:
(1)
Research and development costs were incurred in the amount of $4,000,000 and are expected to benefit equally the next 3 years.
(2)
Advertising costs were $75,000, of which one-third related to the first-quarter sales.
(3)
There was a gain on the early extinguishment of debt in the amount of $1,115,000.
Assume that Good Time, Inc. had 500,000 shares of common stock outstanding throughout the first quarter.
Required:
In good form, present the quarterly income statement of Good Time, Inc. (assume an effective income tax rate of 40%).