Homework Session 11 Spring 2010 - Homework Session 11...

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Homework Session 11 Spring 2010 P6–3. Income Statement Items Case A Case B Gross sales revenue $239,000 $165,000 Sales returns and allowances 20,000 i. 40,500 Net sales revenue a. 219,000 g. 124,500 Cost of goods sold c. 153,300 h. (70%) 87,150 Gross profit b. (30%) 65,700 f. 37,350 Operating expenses d. 43,700 18,600 Pretax income 22,000 d. 18,750 Income tax expense (20%) e. 4,400 e. 3,750 Income before extraordinary items f. 17,600 c. 15,000 Extraordinary gain (loss) (2,000) 10,000 Less: Income tax (20%) g. 400 b. (2,000) Net income h. $16,000 a. $23,000 EPS (10,000 shares) i. $1.60 $2.30 Note = Computations in order CASE A a. $239,000 – $20,000 = $219,000 b. $219,000 x .30 = $65,700 c. $219,000 – $65,700 = $153,300 d. $65,700 – $22,000 = $43,700 e. $22,000 x .20 = $4,400 f. $22,000 – $4,400 = $17,600 g. $2,000 x .20 = $400 h. $17,600 - $2,000 + $400 = $16,000 i. $16,000 ÷ 10,000 = $1.60 CASE B a. $2.30 x 10,000 shares = $23,000 b. $10,000 x .20 = $2,000 c. $23,000 - $10,000 + $2,000 = $15,000 d. $15,000 ÷ .80 = $18,750 e. $18,750 - $15,000 = $3,750 f. $18,750 + $18,600 = $37,350 g. $37,350 ÷ (1 - .70) = $124,500 h. $124,500 - $37,350 = $87,150 i. $165,000 - $124,500 = $40,500
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1. Bad debt expense (+E, –SE). ..................................................... 162 Allowance for doubtful accounts (+XA, –A). .................... 162 End-of-period bad debt expense estimate. Allowance for doubtful accounts (–XA, +A). ............................... 145 Accounts receivable (–A). ................................................ 145 Write-off of bad debts. 2. Year 2. ....................................... $69 + $30 – $41 = $58 Year 1. ....................................... $61 + $23 – $15 = $69 Allowance for DA Year 2 Allowance for DA Year 1 69 Beg. bal. 61 Beg. bal Write-offs 41 30
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Homework Session 11 Spring 2010 - Homework Session 11...

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