ch04 - SOLUTIONS TO B EXERCISES E4-1B (1820 minutes)...

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Unformatted text preview: SOLUTIONS TO B EXERCISES E4-1B (1820 minutes) Computation of net income Change in assets: $252,800 + $144,000 + $406,400 $150,400 = $652,800 Increase Change in liabilities: $ 262,400 $163,200 = 99,200 Increase Change in stockholders equity: $553,600 Increase Change in stockholders equity accounted for as follows: Net increase $553,600 Increase in common stock $400,000 Increase in additional paid-in capital 41,600 Decrease in retained earnings due to dividend declaration (60,800 ) Net increase accounted for 380,800 Increase in retained earnings due to net income $172,800 4-1 E4-2B (2535 minutes) (a) Total net revenue: Sales $312,000 Less: Sales discounts $ 6,240 Sales returns 9,920 16,160 Net sales 295,840 Dividend revenue 56,800 Rental revenue 5,200 Total net revenue $357,840 (b) Net income: Total net revenue (from a) $357,840 Expenses: Cost of goods sold 147,520 Selling expenses 79,520 Administrative expenses 66,000 Interest expense 10,160 Total expenses 303,200 Income before taxes 54,640 Income taxes 24,800 Net income $ 29,840 (c) Dividends declared: Ending retained earnings $107,200 Beginning retained earnings 91,520 Net increase 15,680 Less: Net income (29,840) Dividends declared $ 14,160 4-2 E4-2B (Continued) ALTERNATE SOLUTION Beginning retained earnings $ 91,520 Add: Net income 29,840 121,360 Deduct: Dividends declared ? Ending retained earnings $107,200 Dividends declared must be $14,160 ($121,360 $107,200) 4-3 E4-3B (2025 minutes) Leon Paul Inc. Income Statement For Year Ended December 31, 2007 Sales $2,500,000 Less: Sales discounts 34,000 Net sales 2,466,000 Expenses Cost of goods sold 1,000,000 Selling expenses 800,000 Administrative expenses 200,000 Interest expense 40,000 Total expenses 2,040,000 Income before taxes 426,000 Income taxes 127,800 Net income (per share $14.91) $ 298,200 Determination of amounts: Administrative expenses = 20% of cost of good sold = 20% of $1,000,000 = $200,000 Gross sales X 8% = administrative expenses = $200,000 Gross sales = $2,500,000 Selling expenses = 4 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 $200,000 = $800,000 Per share $14.91 ($298,200 20,000) 4-4 E4-4B (3035 minutes) (a) Multiple-Step Form Saghir Company Income Statement For the Year Ended December 31, 2007 (In thousands, except earnings per share) Sales $135,100 Cost of goods sold 84,798 Gross profit 50,302 Operating Expenses Selling expenses Sales commissions $11,172 Depr. of sales equipment 9,072 Transportation-out 3,766 $24,010 Administrative expenses Officers salaries 6,860 Depr. of office furn. and equip. 5,544 12,404 36,414 Income from operations 13,888 Other Revenues and Gains Rental revenue 24,122 38,010 Other Expenses and Losses Interest expense 2,604 Income before taxes 35,406 Income taxes 12,698 Net income $ 22,708 Earnings per share ($22,708 40,550) $0.56 4-5 E4-4B (Continued)...
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ch04 - SOLUTIONS TO B EXERCISES E4-1B (1820 minutes)...

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