Intermediate Accounting

Intermediate Accounting - SOLUTIONS TO EXERCISES EXERCISE...

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Unformatted text preview: SOLUTIONS TO EXERCISES EXERCISE 4-1 (18-20 minutes) Calculation of net income: Increase in assets: $74,000 + $45,000 + $137,000 – $47,000 = $209,000 Increase in liabilities: $82,000 – $56,000 = 26,000 Increase in shareholders’ equity: $183,000 Change in shareholders’ equity accounted for as follows: Net increase $183,000 Increase in common shares $125,000 Increase in contributed surplus 13,000 Decrease in retained earnings due to dividend declaration (19,000 ) Net increase accounted for 119,000 Increase in retained earnings due to net income $ 64,000 EXERCISE 4-2 (18-20 minutes) Jan. 1, 2008 Dec. 31, 2008 Chang e Cash $23,000 $ 20,000 ($ 3,000) Accounts receivable 19,000 36,000 17,000 Other assets (derived) 33,000 45,000 12,000 Total assets 75,000 101,000 26,000 Liabilities (1/1/08 derived) (37,000 ) (41,000 ) (4,000 ) Capital (12/31/08 derived) $38,000 $ 60,000 $22,000 Calculation of net income: Capital account Dec. 31, 2008 $60,000 Capital account Jan. 1, 2008 38,000 Increase 22,000 Add: Withdrawals made $11,000 Less: Cash investment made 5,000 6,000 Net income $28,000 EXERCISE 4-3 (18-20 minutes) (a) Total net revenue: Sales $390,000 Less: Sales discounts $ 7,800 Sales returns 12,400 20,200 Net sales 369,800 Dividends earned 71,000 Rental revenue 6,500 Total net revenue $447,300 (b) Net income: Net revenues (from a) $447,300 Expenses: Cost of goods sold 184,400 Selling expenses 99,400 Administrative expenses 82,500 Interest expense 12,700 Total expenses 379,000 Income before taxes 68,300 Income taxes 31,000 Net income $ 37,300 (c) Dividends declared: Ending retained earnings $134,000 Beginning retained earnings 114,400 Net increase 19,600 Less net income (37,300 ) Dividends declared $ 17,700 EXERCISE 4-3 (Continued) ALTERNATE SOLUTION Beginning retained earnings $114,400 Add net income 37,300 151,700 Deduct dividends declared (derive) ?___ Ending retained earnings $134,000 Dividends declared must be $17,700 ($151,700 – $134,000) EXERCISE 4-4 (20-25 minutes) Geneva Inc. Income Statement For Year Ended December 31, 2008 Sales $2,100,000 Less sales discounts 15,000 Net sales 2,085,000 Expenses Cost of goods sold 420,000 Selling expenses 336,000 Administrative expenses 84,000 Interest expense 20,000 Total expenses 860,000 Income before taxes 1,225,000 Income taxes 428,750 Net income $ 796,250 Earnings per share $53.08 Determination of amounts: Administrative expenses = 20% of cost of good sold $84,000 = 20% of $420,000 Gross sales X 4% = administrative expenses Gross sales = $2,100,000 ($84,000 / 4%) Selling expenses = four times administrative expenses. (operating expenses consist of selling and administrative expenses; since selling expenses are 4/5 of operating expenses, selling expenses are 4 times administrative expenses.) = 4 X $84,000 = $336,000 Per share $53.08 ($796,250 ÷ 15,000) EXERCISE 4-5 (30-35 minutes) (a) Multiple-Step Form Singh Corp....
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This note was uploaded on 11/16/2009 for the course BBA ADMN1107 taught by Professor M.o'gay during the Fall '08 term at Laurentian.

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Intermediate Accounting - SOLUTIONS TO EXERCISES EXERCISE...

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