Chapter 4 IS and RE statement Soll - Chapter 04 BRIEF EXERCISE 4-1 Tim Allen Co Income Statement For the Year 2007 Revenues Sales $540,000 Expenses Cost

Chapter 4 IS and RE statement Soll - Chapter 04 BRIEF...

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Chapter 04 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. 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 1
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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 2
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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 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 3
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Income before extraordinary item $1.02* Extraordinary loss, net of tax (.11 )* Net income $ .91 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 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 4
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BRIEF EXERCISE 4-10 Lincoln Corporation Retained Earnings Statement For the Year Ended December 31, 2007 Retained earnings, January 1, as reported ................................... $ 675,000 Correction for overstatement of expenses in prior period (net of tax) ...................................................... 80,000 Retained earnings, January 1, as adjusted .................................. 755,000 Add: Net income .............................................................................. 2,400,000 3,155,000 Less: Cash dividends ...................................................................... 75,000 Retained earnings, December 31 ................................................... $3,080,000 BRIEF EXERCISE 4-11 (a) Net income (Dividend revenue) $3,000 (b) Net income $3,000 Unrealized holding gain 5,000 Comprehensive income $8,000 (c) Unrealized holding gain (Other comprehensive income) $5,000 (d) Accumulated other comprehensive income, January 1, 2007 $ 0 Unrealized holding gain 5,000 Accumulated other comprehensive income, December 31, 2007 $5,000 5
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SOLUTIONS TO EXERCISES EXERCISE 4-1 (18–20 minutes) Computation of net income Change in assets: $79,000 + $45,000 + $127,000 – $47,000 = $204,000 Increase Change in liabilities: $ 82,000 – $51,000 = 31,000 Increase
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