Class24 - Solutions

Class24 - Solutions - EXERCISE 22-1 (a) The net income to...

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EXERCISE 22-1 (a) The net income to be reported in 2008, using the retrospective approach, would be computed as follows: Income before income tax $700,000 Income tax (35% x $700,000) 245,000 Net income $455,000 (b) Construction in Process. ............................. 190,000 Deferred Tax Liability ($190,000 x 35%) 66,500 Retained Earnings. ................................ 123,500* *($190,000 x 65% = $123,500) EXERCISE 22-4 2004 (a) Retained earnings, January 1, as reported. ..... $160,000 Cumulative effect of change in accounting principle to average cost. ............................... (15,000 )* Retained earnings, January 1, as adjusted. ..... $145,000 *[$10,000 (2002) + $5,000 (2003)] 2007 (b) Retained earnings, January 1, as reported. ..... $590,000 Cumulative effect of change in accounting principle to average cost. ............................... (25,000 )* Retained earnings, January 1, as adjusted. ..... $565,000 *[$10,000 (2002) + $5,000 (2003) + $10,000 (2004) – $10,000 (2005) + $10,000 (2006)] 1
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EXERCISE 22-4 (Continued) 2008 (c) Retained earnings, January 1, as reported. ..... $780,000 Cumulative effect of change in accounting principle to average cost. ............................... (20,000 )* Retained earnings, January 1, as adjusted. ..... $760,000 *($25,000 at 12/31/06 – $5,000)
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Class24 - Solutions - EXERCISE 22-1 (a) The net income to...

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