# Below is select information from two, independent companies. Additional information includes: • On January 1, Company A issued a 5-year $1,500,000 bond with at 6% stated rate. Interest is paid semiannually and the bond was sold at 105.5055 to yield a market rate of 4.75%. • On January 1, Company B sold$1,500,000 of common stock and paid dividends of $75,000. A. Prepare an income statement for each company (ignore taxes) B. Explain why the net income amounts are different, paying particular attention to the operational performance and financing performance of each company. (Hint: it may be helpful for you to create an amortization table). FindFindarrow_forward ### Principles of Accounting Volume 1 19th Edition OpenStax Publisher: OpenStax College ISBN: 9781947172685 #### Solutions Chapter Section FindFindarrow_forward ### Principles of Accounting Volume 1 19th Edition OpenStax Publisher: OpenStax College ISBN: 9781947172685 Chapter 13, Problem 2TP Textbook Problem 1 views ## Below is select information from two, independent companies.Additional information includes:• On January 1, Company A issued a 5-year$1,500,000 bond with at 6% stated rate. Interest is paid semiannually and the bond was sold at 105.5055 to yield a market rate of 4.75%.• On January 1, Company B sold $1,500,000 of common stock and paid dividends of$75,000.A. Prepare an income statement for each company (ignore taxes)B. Explain why the net income amounts are different, paying particular attention to the operational performance and financing performance of each company. (Hint: it may be helpful for you to create an amortization table).

To determine

(a)

Introduction:

Income statement of a company describe the financial results of a company in the form of profit or loss.

To prepare:

Income statements for the companies.

### Explanation of Solution

 Company A Company B Particulars Amount ($) Amount ($) Amount ($) Amount ($) Revenues Net sales 2,300,000 2,300,000 Total Revenue(A) 2,300,000 2,300,000 Expenses Cost of Goods Sold 1,081,000 1,081,000 Total General and Administration expenses ($32,000+$575,000+\$175,000)
To determine

(b)

To explain:

The reason of varying income in both companies.

Introduction:

Income statement of a company describe the financial results of a company in the form of profit or loss.

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