takehomequizonefall2009solution

takehomequizonefall2009solution - Name_ Take Home Quiz One...

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Name_________________ Take Home Quiz One Fall 2009 Problem 1 (2 points) Shown below is an income statement for 2008 that was prepared by a poorly trained bookkeeper of Sanctuary Corporation. Sanctuary Corporation INCOME STATEMENT December 31, 2008 Sales revenue $1,500,000 Investment revenue 22,750 Cost of goods sold (730,000) Rent Expense (155,000) Salaries expense (215,000) Interest expense (12,500) Insurance expense (27,500) Supplies expense (15,000) Selling expense (130,000) Depreciation expense (80,000) Income before income taxes 157,750 Special items Major casualty loss (extraordinary item) (75,000) Cumulative effect of change in accounting principle 175,000 Net federal income tax liability (97,945 ) Net income $ 159,805 In addition to the above information, the bookkeeper failed to consider the following issues: 1. In December, the bookkeeper discovered that depreciation in the amount of $50,000 (pre- tax) on a piece of equipment had not been recorded in 2001. 2. At the end of December, the bookkeeper found out that a component of the business had been sold. From January through December, the component had incurred an operating loss of $125,000. The sale was made at a loss of $50,000. 3. In November the company sold the only investment it ever owned for a gain of $75,000. Instructions Prepare a multiple income statement for 2008 for Sanctuary Corporation that is presented in accordance with generally accepted accounting principles (including format and terminology). Sanctuary Corporation has 75,000 shares of common stock outstanding and has a 38% federal income tax rate on all tax related items. Round all earnings per share figures to the nearest cent.
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Sanctuary Corporation INCOME STATEMENT December 31, 2008 Sales $1,500,000 Cost of goods sold 730,000 Gross Profit 770,000 Operating expenses Rent Expense 155,000 Salaries Expense 215,000 Insurance Expense 27,500 Supplies Expense 15,000 Selling Expense 130,000 Depreciation expense 80,000 Income from operations 147,500 Other revenue and gains Investment Revenue 22,750 Other expenses and losses Interest expense 12,500 Income from continuing operations before tax 157,750 Income taxes 59,945 Income from continuing operations 97,805 Discontinued Operations Loss from discontinued operations (net of tax)
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takehomequizonefall2009solution - Name_ Take Home Quiz One...

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