673000 22750 135000 515250 the objectives of

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Unformatted text preview: d expiration of insurance policy. (5 ) Interest Expense (E, –SE) 25,000* Interest Payable (+L) 25,000 Incurred, but did not pay, interest. * $500,000 10% = $50,000 less 25,000 Already Recognized (6 ) Income Tax Expense (E, –SE) (+L) 21,000* Income Tax Liability 21,000 Accrued income taxes on continuing operations. * $21,000 = = Income from continuing operations Tax rate of 35% {($1,256,000 + $76,000) – [$737,000 + $100,000 + $255,000 + ($25,000 + $25,000) + $25,000 + $85,000 + $20,000]} 35% Income Tax Liability (–L) 12,250* Extraordinary Loss (–Lo, +SE) 12,250 Recognized income tax benefit from extraordinary loss. * $12,250 = Extraordinary loss of $35,000 Tax rate of 35% Income Tax Liability (–L) Cumulative Loss from Accounting Change (–Lo, +SE) 21,000 21,000 Recognized income tax benefit from accounting change. P13–13 Continued Closing entries (c1) Income Summary Sales Gain on Sale of Land Expenses Accounting Change 22,750 1,256,000 76,000 Cost of Goods Sold 737,000 Administrative 100,000 Selling Expenses 255,000 Interest Expense 50,000 Bad Debt Expense 25,000 Depreciation Expense 85,000 Insurance Expense 20,000 Income Tax Expense 21,000 Extraordinary Loss 22,750 Cumulative Loss from 39,000 Closed revenues and expenses into Income Summary. (c2) Retained Earnings 22,750 Income Summary 22,750 Closed Income Summary into Retained Earnings. (c3) Retained Earnings Closed Dividends into Retained Earnings. 135,000 Dividends 135,000 P13–13 Concluded b. Laidig Industries Income Statement For the Year Ended December 31, 2012 Revenues: Sales Gain on sale of fixed assets Total revenues $ $ 1,256,000 76,000 1,332,000 Expenses: Cost of goods sold Administrative expenses Selling expenses Depreciation expense Bad debt expense Insurance expense Interest expense Total expenses Income from continuing operations (before taxes) 60,000 Income taxes 21,000 Income from continuing operations 39,000 Extraordinary loss (net of tax benefit of $12,250) (22,750) Income effect due to change in accounting principle (net of tax benefit of $21,000) (39,000) Net loss $ 737,000 100,000 255,000 85,000 25,000 20,000 50,000 1,272,000 $ $ $ (22,750) Earnings per share: Income from continuing operations Extraordinary loss Income effect due to change in accounting principle Net earnings per share $ $ 0.20 (0.11) (0.20) (0.11) c. Laidig Industries Statement of Retained Earnings For the Year Ended December 31, 2012 Retained earnings, January 1, 2012 Net loss Less: Dividends declared Retained earnings, December 31, 2012 d. $ 673,000 (22,750) (135,000) $ 515,250 The objectives of financial accounting are to allow prediction of future cash flows. Earnings numbers reflect changes in a company’s resources. Some measures such as income from continuing operations are highly persistent, reflecting amounts expected to persist in the future due to normal business operations. Net income includes an extraordinary loss and income from a change in accounting principle, items that have low persistence and are less useful for the prediction of future cash flows. ISS...
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This homework help was uploaded on 03/03/2014 for the course ACCT 5053 taught by Professor Staff during the Fall '08 term at Oklahoma State.

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