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ch04HWsolutionsPlus - CHAPTER 4 Income Statement and...

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CHAPTER 4 Income Statement and Related Information EXERCISE 4-1 Computation of net income Change in assets: $69,000 + $45,000 + $127,000 – $47,000 = $194,000 Increase Change in liabilities: $ 82,000 – $51,000 = 31,000 Increase Change in stockholders’ equity: $163,000 Increase Change in stockholders’ equity accounted for as follows: Net increase ........................................................... $163,000 Increase in common stock .......................... $125,000 Increase in additional paid-in capital ......... 13,000 Decrease in retained earnings due to dividend declaration ................................ (24,000 ) Net increase accounted for .................................. 114,000 Increase in retained earnings due to net income ................................................................ $ 49,000
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EXERCISE 4-2 (a) Total net revenue: Sales ............................................. $400,000 Less: Sales discounts ................ $ 7,800 Sales returns .................... 12,400 20,200 Net sales ....................................... 379,800 Dividend revenue ......................... 71,000 Rental revenue ............................. 6,500 Total net revenue ................ $457,300 (b) Net income: Total net revenue (from a) .......... $457,300 Expenses: Cost of goods sold ................ $184,400 Selling expenses ................... 99,400 Administrative expenses ...... 82,500 Interest expense .................... 12,700 Total expenses ................ 379,000 Income before income tax .......... 78,300 Income tax .................................... 26,600 Net income ............................. $ 51,700 (c) Dividends declared: Ending retained earnings ........... $134,000 Beginning retained earnings ...... 114,400 Net increase ........................................... 19,600 Less: Net income (from (b)) ................ 51,700 Dividends declared ............................... $ 32,100
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EXERCISE 4-2 (Continued) ALTERNATE SOLUTION (for (c)) Beginning retained earnings .............................. $114,400 Add: Net income ................................................. 51,700 166,100 Less: Dividends declared ................................... ? Ending retained earnings .................................... $134,000 Dividends declared must be $32,100 ($166,100 – $134,000) EXERCISE 4-3 (20–25 minutes) DUNBAR INC. Income Statement For Year Ended December 31, 2010 Revenues Net sales ($1,125,000 (b) – $17,000) ................... $1,108,000 Expenses Cost of goods sold ........................................... $500,000 Selling expenses ............................................... 360,000 (c) Administrative expenses ................................. 90,000 (a) Interest expense ............................................... 20,000 Total expenses ......................................... 970,000 Income before income tax .......................................... 138,000 Income tax ......................................................... 41,400 Net income $ 96,600 Earnings per share (d) ................................................ $3.22 * *Rounded
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EXERCISE 4-6 (a) Multiple-Step Form WEATHERSPOON SHOE CO. Income Statement For the Year Ended December 31, 2010 Net sales ................................................ $980,000 Cost of goods sold ............................... 516,000 Gross profit ........................................... 464,000 Operating Expenses Selling expenses Wages and salaries .................. $114,800 Depr. exp. (70% X $65,000) ...... 45,500 Materials and supplies ............. 17,600 $177,900 Administrative expenses Wages and salaries .................. 135,900 Other admin. expenses ............ 51,700 Depr. exp. (30% X $65,000) ...... 19,500 207,100 385,000 Income from operations ...................... 79,000 Other Revenues and Gains Rental revenue ................................ 29,000 108,000 Other Expenses and Losses Interest expense ............................. 18,000 Income before income tax ................... 90,000 Income tax ....................................... 30,600 Net income ............................................ $ 59,400 Earnings per share ($59,400 ÷ 20,000) .............................. $2.97
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