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Intermediate Accounting I Chapter 4 Additional Problems 1. 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? 2. 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: cost of 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. 3. 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. 4. 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.
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5. Below is a list of events. Identify those events that would be reported as an extraordinary item “below the line” on the income statement. If the event is not reported as an extraordinary item, identify where it would be reported on the income statement, if at all. a.
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This note was uploaded on 02/12/2012 for the course ACCT 3001 taught by Professor Moffitt during the Spring '08 term at LSU.

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