Solutions - Ch 4 ACC221 - Chapter4 BRIEFEXERCISE41 TimAllenCo IncomeStatement FortheYear2007 Revenues Sales $540,000 Expenses Costofgoodssold

Solutions - Ch 4 ACC221 - Chapter4 BRIEFEXERCISE41...

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Chapter 4  SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 4-1 Tim Allen Co. Income Statement For the Year 2007 Revenues Sales .......................................................................... $540,000 Expenses Cost of goods sold ................................................... $320,000 Wage expense ........................................................... 120,000 Other operating expenses ....................................... 10,000 Income tax expense .................................................          25,000 Total expenses .................................................       475,000 Net income ........................................................................... $65,000 Earnings per share .............................................................. $0.65* *$65,000  ÷  100,000 shares. Note:  The increase in value of the company reputation and the unrealized  gain on the value of patents are not reported. 2-1
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BRIEF EXERCISE 4-2 Turner Corporation Income Statement For the Year Ended December 31, 2007 Revenues Net sales ................................................................... $2,400,000 Interest revenue .......................................................             31,000         Total revenues .................................................    2,431,000 Expenses Cost of goods sold .................................................. $1,250,000 Selling expenses ..................................................... 280,000 Administrative expenses ........................................ 212,000 Interest expense ...................................................... 45,000 Income tax expense* ...............................................           193,200 Total expenses ...............................................    1,980,200 Net income ........................................................................ $    450,800 Earnings per share** ........................................................ $6.44 *($2,431,000 – $1,250,000 – $280,000 – $212,000 – $45,000) X 30% =  $193,200. **$450,800  ÷  70,000 shares. 2-2
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BRIEF EXERCISE 4-3 Turner Corporation Income Statement For the Year Ended December 31, 2007 Net sales ................................................................... $2,400,000 Cost of goods sold ..................................................    1,250,000 Gross profit ................................................... 1,150,000 Selling expenses ..................................................... $280,000 Administrative expenses ........................................    212,000           492,000 Income from operations .......................................... 658,000 Other revenue and gains Interest revenue ............................................ 31,000 Other expenses and losses Interest expense ............................................         45,000             14,000 Income before income tax ...................................... 644,000 Income tax ................................................................           193,200 Net income ............................................................... $   450,800 Earnings per share .................................................. $6.44 * *$450,800  ÷  70,000 shares. 2-3
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BRIEF EXERCISE 4-4 Income from continuing operations $12,600,000 Discontinued operations Loss from operation of discontinued      restaurant division (net of tax) $315,000 Loss from disposal of restaurant division     (net of tax)   189,000        504,000 Net income $12,096,000 Earnings per share Income from continuing operations $1.26 Discontinued operations, net of tax         (.05 )* Net income $1.21 *Rounded BRIEF EXERCISE 4-5 Income before income tax and extraordinary      item $7,300,000 Income tax    2,190,000 Income before extraordinary item 5,110,000 Extraordinary item—loss from casualty $770,000 Less: Applicable income tax    231,000           539,000 Net income $4,571,000 Earnings per share Income before extraordinary item $1.02* Extraordinary loss, net of tax         (.11 )* Net income $            .91 *Rounded 2-4
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BRIEF EXERCISE 4-6 2007 2006 2005 Income before income tax $190,000 $145,000 $170,000 Income tax (30%)          57,000          43,500          51,000 Net Income $133,000 $101,500 $119,000 BRIEF EXERCISE 4-7 Kingston would not report any cumulative effect because a change in esti- mate is not handled retroactively. Kingston would report bad debt expense of $120,000 in 2007. BRIEF EXERCISE 4-8 $1,200,000 – $250,000 = $5.00  per share 190,000 2-5
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BRIEF EXERCISE 4-9 Lincoln Corporation Retained Earnings Statement For the Year Ended December 31, 2007 Retained earnings, January 1 ............................................ $    675,000 Add: Net income ..................................................................    2,400,000 3,075,000 Less: Cash dividends .........................................................             75,000 Retained earnings, December 31 ....................................... $3,000,000 BRIEF EXERCISE 4-10
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