ACIS+3115+Chapter+4+Homework+Solutions

ACIS+3115+Chapter+4+Homework+Solutions - EXERCISE 4-11...

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Unformatted text preview: EXERCISE 4-11 (2025 minutes) (a) McENTIRE CORPORATION Retained Earnings Statement For the Year Ended December 31, 2012 Balance, January 1, as reported..................................... $225,000* Correction for depreciation error (net of $10,000 tax).................................................... (15,000) Cumulative decrease in income from change in inventory methods (net of $18,000 tax)................... (27,000 ) Balance, January 1, as adjusted..................................... 183,000 Add: Net income............................................................ 132,000 ** 315,000 Less: Dividends declared............................................... 100,000 Balance, December 31..................................................... $215,000 *($40,000 + $125,000 + $160,000) ($50,000 + $50,000) **[$220,000 (40% X $220,000)] (b) Total retained earnings would still be reported as $215,000. A restriction does not affect total retained earnings; it merely labels part of the retained earnings as being unavailable for dividend distribution. Retained earnings would be reported as follows: Retained earnings: Appropriated...................................................... $ 70,000 Unappropriated.................................................. 145,000 Total............................................................... $215,000 PROBLEM 4-3 MAHER INC. Income Statement (Partial) For the Year Ended December 31, 2012 Income from continuing operations before income tax..................................................... $838,500 (a) Income tax.......................................................... 220,350 (b) Income from continuing operations.......................... 618,150 Discontinued operations Loss from disposal of recreational division. . $115,000 Less: Applicable income tax reduction......... 34,500 80,500 Income before extraordinary item.............................. 537,650 Extraordinary item: Major casualty loss........................................... 90,000 Less: Applicable income tax reduction......... 41,400 48,600 Net income.................................................................... $489,050 Per share of common stock: Income from continuing operations................ $5.15* Discontinued operations, net of tax................ (0.67 )* Income before extraordinary items................. 4.48 Extraordinary item, net of tax.......................... (0.40 ) Net income ($489,050 120,000)..................... $4.08 *Rounded (a) Computation of income from cont. operations before taxes: As previously stated............................................... $790,000 Loss on sale of securities...................................... (57,000) Gain on proceeds of life insurance policy ($150,000 $46,000)................................ 104,000 Error in computation of depreciation As computed ($54,000 6).......................................... $9,000 Corrected ($54,000 $9,000) 6................................Corrected ($54,000 $9,000) 6....
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ACIS+3115+Chapter+4+Homework+Solutions - EXERCISE 4-11...

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