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ACT3391HomeworkFall2009Solutions6&7 - HOMEWORK Fall...

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HOMEWORK - Fall 2009 – Solutions 6. (3 points) O Corporation's capital structure consists of 600,000 shares of common stock. At December 31, 2007 an analysis of the accounts revealed the following information: Accounts receivable, Allowance for doubtful accounts, Interest payable on money borrowed, Inventory These account balances are ignored because they are balance sheet accounts, not income statement accounts. O Corporation Income Statement For the Year Ended December 31, 2007 Sales $9,200,000 Cost of goods sold 2,800,000 Gross profit 6,400,000 Selling, general and administrative expenses 3,100,000 Income from operations 3,300,000 Dividend income on stock investments 250,000 Interest expense 320,000 Income before income taxes and extraordinary item 3,230,000 Income taxes 1,130,500 Income before extraordinary item 2,099,500 Earthquake-related gain, net of applicable income taxes of $420,000 780,000 Net income $2,879,500 O Corporation Statement of Retained Earnings For the Year Ended December 31, 2007 Retained earnings, January 1, 2007 $12,000,000 Net income 2,879,500 Dividends declared 100,000 Retained earnings, December 31, 2007 $14,779,500 7. (3 points) Presented below is information relating to the J Company for the year ended 12-31-06.
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