Intermediate Accounting I
Chapter 4 Additional Problems
KAT, Inc. had net assets (stockholder’s equity) of $450,000 at December 31, 2005, and
$250,000 at January 1, 2005. During 2005, KAT issued common stock of $125,000 and
paid dividends of $35,000. (a) Compute KAT’s 2001 net income. (b) If KAT’s 2005
revenues and gains total $300,000, what is its’ total expenses and losses?
For the year ended September 30, 2005, Tin Pan Alley, Inc. had net sales of $1,780,000
and investment revenue of $103,000. The company’s expenses for the year were:
goods sold, $1,190,000; selling expenses, $272,000; administrative expenses, $211,000;
interest expense, $76,000; and income tax expense, $40,000. Tin Pan Alley has 20,000
shares of stock outstanding. Prepare (a) a single-step income statement and then (b) a
multiple-step income statement.
Great Mornings Corporation had income from continuing operations of $12,600,000 for
the year ended June 30, 2005. Additional information (given before taxes) for Great
Mornings for FYE 2005 is:
flood loss (considered extraordinary) of $2,000,000; gain on
early extinguishment of debt of $500,000; loss from operations of a discontinued
cosmetics line of $1,500,000; and loss from disposal of the cosmetics line of $620,000.
Great Mornings has a tax rate of 40%. Prepare a partial income statement for Great
Mornings, beginning with the line “income from continuing operations.” Great Mornings
has never extinguished debt early before and has no current plans to continue doing so.
The company had an average of 6.5 million shares of stock outstanding for the year.
The Board of Directors of White Cast Company voted on June 15, 2005, to dispose of
their Creative Furniture division. The Creative Furniture division had operating losses of
$450,000 through November 30, 2005. On November 30, White Cast sold the division at
a gain of $75,000. White Cast has a tax rate of 35%. Prepare the discontinued operations
section of the income statement for the year ended November 30, 2005.