Chapter 04 - Homework Solutions

Chapter 04 - Homework Solutions - 4-1CHAPTER 4 Income...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 4-1CHAPTER 4 Income Statement and Related Information SOLUTIONS TO EXERCISES EXERCISE 4-1 (18–20 minutes) Computation of net income Change in assets: $79,000 + $45,000 + $127,000 – $47,000 = $204,000 IncreaseChange in liabilities: $ 82,000 – $51,000 = 31,000IncreaseChange in stockholders’ equity: $173,000IncreaseChange in stockholders’ equity accounted for as follows: Net increase $173,000Increase in common stock $125,000 Increase in additional paid-in capital 13,000 Decrease in retained earnings due to dividend declaration (19,000)Net increase accounted for 119,000Increase in retained earnings due to net income $ 54,0004-2EXERCISE 4-3 (20–25 minutes) LeRoi Jones Inc. Income Statement For Year Ended December 31, 2007 Revenues Net sales ($1,250,000(b)– $17,000).......................$1,233,000 Expenses Cost of goods sold ...............................................500,000 Selling expenses...................................................400,000(c)Administrative expenses......................................100,000(a)Interest expense....................................................20,000Total expenses.............................................1,020,000Income before income tax ..............................................213,000 Income tax .............................................................63,900Net income ......................................................................$ 149,100Earnings per share..........................................................$ 7.46* *Rounded 4-3EXERCISE 4-3 (Continued) Determination of amounts (a) Administrative expenses = 20% of cost of good sold = 20% of $500,000 = $100,000 (b) Gross sales X 8% = administrative expenses = $100,000 ÷ 8% = $1,250,000 (c) Selling expenses = four 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 $100,000 = $400,000 Earnings per share $7.46 ($149,100 ÷ 20,000) Note:An alternative income statement format is to show income tax a part of expenses, and not as a separate item. In this case, total expenses are $1,083,900. 4-4EXERCISE 4-4 (30–35 minutes) (a) Multiple-Step FormP. Bride Company Income Statement For the Year Ended December 31, 2007 (In thousands, except earnings per share) Sales ..................................................................$96,500Cost of goods sold...........................................60,570Gross profit on sales........................................35,930Operating ExpensesSelling expenses Sales commissions ..............................$7,980Depr. of sales equipment.....................6,480Transportation-out................................2,690$17,150 Administrative expenses Officers’ salaries...................................4,900Depr. of office furn. and equip.............3,9608,86026,010Income from operations.................9,920Other Revenues and Gains...
View Full Document

This note was uploaded on 01/20/2011 for the course ACC 301 taught by Professor Staff during the Fall '08 term at Kentucky.

Page1 / 19

Chapter 04 - Homework Solutions - 4-1CHAPTER 4 Income...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online