Lesson%202%20Solutions

Lesson%202%20Solutions - Suggested Solutions for ACCT 351...

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Unformatted text preview: Suggested Solutions for ACCT 351 Adapted from Beechy, T. H., & Conrod, J. E. D. (2005). Solutions manual to accompany intermediate accounting, volume 1 (3 rd Can. ed.). Toronto: McGraw-Hill Ryerson. Reproduced with permission. Page 1 of 15 Lesson 2, Chapter 3 Assignment 3-4 (text, pp. 119–120) Requirement 1 Sandvik Cement Company Income Statement (single-step) For the Year Ended 31 December 20X5 Revenues and gains: Sales.................................................................................................. $95,000 Rental................................................................................................ 35,000 Gain on sale of short-term investment.............................................. 14,000 Gain on sale of equipment................................................................ 15,000 Total revenues and gains.............................................................. $159,000 Expenses and losses: Cost of goods sold ............................................................................ 45,000 Distribution expense......................................................................... 18,000 General and administrative expense................................................. 12,000 Depreciation expense........................................................................ 9,000 Interest expense ................................................................................ 4,000 Loss on sale of warehouse................................................................ 3,000 Loss on flood damage....................................................................... 20,000 Income tax expense ($159,000 - $111,000) × 30%.......................... 14,400 Total expenses and losses ............................................................ 125,400 Income before extraordinary item......................................................... 33,600 Extraordinary item: Earthquake loss................................................................................. 25,000 Less: income tax saving ($25,000 × 30%) ....................................... 7,500 17,500 Net income............................................................................................ 16,100 Assumptions: The flood was recurring while the earthquake was not. Alternate assumptions are acceptable. Suggested Solutions for ACCT 351 Page 2 of 15 Assignment 3-4 continued Requirement 2 Sandvik Cement Company Income Statement (multiple-step) For the Year Ended 31 December 20X5 Sales revenue ........................................................................................ $95,000 Cost of goods sold................................................................................. 45,000 Gross margin......................................................................................... 50,000 Operating expenses: Distribution expense......................................................................... $18,000 General and administrative expense................................................. General and administrative expense....
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This note was uploaded on 09/22/2009 for the course ACCOUNTING ACCT-351 taught by Professor Charko during the Fall '09 term at Humber.

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Lesson%202%20Solutions - Suggested Solutions for ACCT 351...

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