121_11A - Question 1 Maple corporation had the following...

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Unformatted text preview: Question 1 Maple corporation had the following line items on their income statement for the year ended December 31, 2011. The income tax rate is 40%. All amounts are in millions. All line items are before tax. Prepare the income statement. Other gains (losses) (2) Operating expenses Cost of goods sold 71 Net sales revenue Extraordinary loss 5 Income tax expense Cumulative effect of change in accounting principle Operating loss on segment sold Gain on sale of segment 64 182 18 10 5 20 Maple Corporation Income Statement Year Ended December 31, 2011 Net sales revenue Cost of goods sold Gross profit Operating expenses Operating income Other gains (losses) Income from continuing operations before income tax Income tax expense Income from continuing operations Operating loss on segment sold, $5, plus tax savings of $2 Gain on sale of segment, $20, less income tax of $8 Income before extraordinary item, change in principle Extraordinary loss, $5, less income tax saving of $2 Cum. effect change in accounting prin., $10, net of tax, $4 Net income What did you learn? Chapter 5 – Page 1 of 5 182 71 111 64 47 (2) 45 18 27 (3) 12 36 (3) 6 39 Question 2 Use the income statement that you prepared for Maple corporation in question 1 to answer the following questions. Maple corporation owns paper mills in the United States and Canada. Profits from the US mills have been improving at 5% per year. Losses at the Canadian mills have been increasing at 10% per year. The entire Canadian segment was sold during the year. A. Calculate the projected net income for next year, 2012. Income from continuing operations 27 (Rate of growth + 1) = N/I 1.05% = 28.35 B. If the Canadian mills had not been sold, what would net income have been for 2011? Net income – Gain on sale of segment net of tax = N/I 39 − 9 = 30 C. If the Canadian mills had not been sold, what would be the projected net income for next year, 2012? − Income from continuing operations (Rate of growth + 1) Loss from Canadian segment, net of tax (Rate of loss + 1) Net income − 27 3 (1.05) = 28.35 (1.10) = 3.30 25.05 What did you learn? Chapter 5 – Page 2 of 5 Question 3 Use the income statement that you prepared for Maple corporation in question 1 to answer the following questions. Maple corporation has 10 million shares outstanding. Calculate earning per share as it would be presented on the income statement. Income from continuing operations Operating loss on seg. sold, $5, plus tax savings $2 Gain on sale of segment, $20, less income tax of $8 Income before extraordinary item, change in principle Extraordinary loss, $5, less income tax saving of $2 Cum. effect change in actg. prin., $10, net of tax, $4 Net income 27 / 10 2.70 (3) / 10 (0.30) 12 / 10 1.20 36 / 10 3.60 (3) / 10 (0.30) 6 / 10 0.60 39 / 10 3.90 What did you learn? Question 4 Oak corporation has a book net income of $50,000. Because Oak uses MACRS depreciation for tax purposes the tax return net income is $40,000. The tax rate is 30%. Prepare the journal entry, the income statement and balance sheet. Account name Debit Credit Income tax expense (50,000 0.30) 15,000 Income tax payable (40,000 0.30) 12,000 Deferred tax liability 3,000 Income Statement Income tax expense Current liability: Long-term liability: 15,000 Balance Sheet Income tax payable Deferred tax liability What did you learn? Chapter 5 – Page 3 of 5 12,000 3,000 Question 5 Review the first year listed on the Intel statement of stockholders’ equity (December 25, 1999 to December 30, 2000). Answer the questions below. A. List the beginning balances in each account. Shares Amount ARUSC Comp. Inc. 6,669 7,316 0 3,791 R/E 21,428 Total 32,535 B. Show the calculation for comprehensive income. Net income + change in unrealized gain, net of tax = Comp. income 10,535 − 3,596 = 6,939 C. List the reasons why the amount of common stock and PIC changed. 1. Shares sold through employee stock plans 2. Reclassification of put warrants 3. Issue of common stock, stock options in acquisitions 4. Conversion of subordinated notes 5. Repurchase and retirement of common stock D. List the reasons why the amount of retained earnings changed. 1. Net income 2. Shares sold through employee stock plans 3. Reclassification of put warrants 4. Repurchase and retirement of common stock 5. Cash dividends declared What did you learn? Chapter 5 – Page 4 of 5 Question 6 Use the annual report PDF file on my web site. Complete the following sentences Costco From the management report The financial statements… These financial statements… The Audit Committee… Both the Company’s… From the report of independent public accountants We have audited… These financial statements… We conducted audits… Those standards require… An audit includes… An audit also includes… In our opinion… As explained in Note 1… Question 7 Calculate all ratios for Costco using the Excel spreadsheet. Use stock price of $21 per share. Chapter 5 – Page 5 of 5 ...
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This note was uploaded on 10/24/2010 for the course ACCOUNTING 31609 taught by Professor R.ambrose during the Fall '09 term at San Mateo Colleges.

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