1. Income Statement CH 5 Q5-1 Hussam Iskandarni /200800510
Majed Al Malehi/
Thamer Alhuzami/
Abdulkreem Al Eliwi/

2. Outline Case question 5-1 The income statement problem
The deficiencies of the problem
Conclusion

3. Case question
John Amos Corporation, the business of john started on January. 1, He had a successful work with no trouble, until he suddenly wants a bank loan for the expansion of the business, so the bank wanted his audited income statement for the year of 2003, he had an income statement that was made by the accountant of john. ( identify the deficiencies of the income statement before it is submitted to the bank)

4. John Amos Corporation Income statement
Sales $850,000
Dividends ,300
Gain on recovery of insurance
proceeds from earthquake loss 38,500
920,800

5. John Amos Corporation Income statement
Less:
Selling expenses ,100
Cost of good sold ,000
Advertising expense ,700
Loss on obsolescence ,000
Administrative expense 73, ,000
Income before tax ,000
Income tax ,000
Net income $84,000

6. The deficiencies of John Amos Corporation
There is a mistake in the heading of the income statement; it should have the name of the company and the date of the income statement
The recovery gain of insurance should be said as extraordinary in a separate section of the income statement
The cost of goods sold usually it is the first in expense then comes selling expenses.

7. Advertising expense is a selling expense and it must be classified as such, unless the expenses are different from periods before.
. Loss on obsolescence of inventories might be classified as an unusual item and separately disclosed if it is unusual or infrequent but not both.
The period of income tax is required to relate the expenses of the income tax to income from continuing the operations.

8. Conclusion
The main points of the presentation was that the income statement had some errors, and those errors had to be corrected before it was given to the bank to get the loan.