harrison6esolutman_ch011

harrison6esolutman_ch011 - Chapter 11 The Income Statement...

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Chapter 11 The Income Statement and the Statement of Stockholders’ Equity Check Points (5-10 min.) CP 11-1 Goldberg Corporation Income Statement Year Ended December 31, 20X8 Net sales revenue Cost of goods sold Gross profit Operating expenses — detailed Operating income Other gains (losses) — detailed Income (loss) from continuing operations before income tax Income tax expense Income (loss) from continuing operations Discontinued operations, less income tax Income before extraordinary item and cumulative effect of change in accounting principle, less income tax Extraordinary gain or loss, less income tax Cumulative effect of change in accounting principle, less income tax Net income (net loss) Chapter 11 The Income Statement and the Statement of Stockholders’ Equity 243
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(10 min.) CP 11-2 Req. 1 Gross profit = $5,236 million Income from continuing operations = $622 million Net income = $99 million Req. 2 Income from continuing operations = $622 million Continuing operations will continue from period to period. Their continuity makes income from continuing operations a good predictor of future net income. Financial Accounting 6/e Solutions Manual 244
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(10-15 min.) CP 11-3 BA Ι I Plus, Inc. Income Statement Year Ended December 31, 20X8 (Thousands ) Net sales revenue…………………………………… $182,000 Cost of goods sold…………………………………. 71,000 Gross profit…………………………………………. .. 111,000 Operating expenses………………………………… 64,000 Operating income…………………………………… 47,000 Other gains (losses)………………………………… (2,000 ) Income from continuing operations before income tax…………………………………………. 45,000 Income tax expense (40%)………………………… 18,000 Income from continuing operations……………. .. 27,000 Gain on discontinued operations, $15,000, less income tax of $6,000………………………. 9,000 Income before extraordinary item………………. . 36,000 Extraordinary gain, $5,000, less income tax of $2,000………………………. 3,000 Net income……………………………………………. $ 39,000 Chapter 11 The Income Statement and the Statement of Stockholders’ Equity 245
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(10-15 min.) CP 11-4 Estimated value = Earnings per share = $2.02 = $33.67 of one share Investment .06 of Target stock capitalization rate On June 7, 2004, Target’s stock closed at $45.88. At that price, an investor should sell because the investor believes the stock is worth only $33.67. Student responses will vary depending on the market price accessed by the student. (10-15 min.) CP 11-5 Earnings per share of common stock (10,000 shares of common stock outstanding): Income from continuing operations [($27,000 – $5,000) / 10,000]………………………… $2.20 Gain on discontinued operations ($9,000 / 10,000). .. .90 Income before extraordinary item [($36,000 – $5,000) / 10,000]…………………………
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This note was uploaded on 04/20/2008 for the course ACG 2021 taught by Professor Hornik during the Spring '08 term at University of Central Florida.

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harrison6esolutman_ch011 - Chapter 11 The Income Statement...

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