Use the Following Information to Answer Questions Bellow
on July

Use the following information to answer Questions bellow
On July 1, Underwater Corporation filed for Chapter 11 reorganization, and a plan of reorganization was formulated. All of the company's prepetition liabilities were considered subject to compromise, except for a note payable that is fully secured by property. During the following six months, the following transactions took place:
•Excess property was sold for $500,000, resulting in a $40,000 loss.
•Termination of a lease resulted in a $20,000 cancellation penalty (paid in cash).
•$35,000 was paid in cash for professional fees.
•$90,000 of excess cash was invested in securities.
•$7,000 of interest revenue was received on investments of excess cash.
At December 31, Underwater's balance sheet appeared as follows:
$\begin{array}{|l|r|l|r}\hline \text { Cash } & \$ 250,000 & \text { Current liabilities (postpetition) } & \$ 300,000 \\\hline \text { Accounts receivable } & 250,000 & \text { Note payable (prepetition, fully secured) } & 1,000,000 \\\hline \text { Inventories } & 350,000 & \text { Liabilities subject to compromise } & 2,000,000 \\\hline \text { Prepaid expenses } & 15,000 & \text { Common stock } & 150,000 \\\hline \text { Property \& equipment (net) } & 2,300,000 & \text { Retained earnings (deficit) } & (185,000) \\\hline \text { Investments } & 100,000 & & \\\hline \text { Total } & \$ 3,265,000 & \text { Total } & \$ 3,265,000 \\\hline\end{array}$

$\text { The liabilities subject to compromise are: }$
$\begin{array}{|l|r|}\hline \text { Accounts payable } & \$ 725,000 \\\hline 4 \% \text { bank loan } & 1,275,000 \\\hline \text { Total liabilities subject to compromise } & \$ 2,000,000 \\\hline\end{array}$

$\text { Other relevant data for the year: }$
$\begin{array}{|l|r|}\hline\text { Revenues } & \$ 4,600,000 \\ \hline \text { Operating expenses } & 4,450,000 \\\hline \text { Income tax expense } & 22,000 \\\hline \text { Cash flows from normal operating activities } & 60,000 \\\hline \text { Capital expenditures } & 70,000 \\\hline \text { Payment of prepetition debt, as authorized by the court } & 175,000 \\\hline \text { Payment of postpetition debt } & 35,000 \\\hline\end{array}$
-Prepare an income statement for Underwater Corporation for the year ended December 31, in the format required during reorganization.