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Unformatted text preview: ion and diluted earnings per share were $1.07, therefore the number of shares would be $1,362/$1.07 = 1,272.897 million. P13–9 a. 1. Extraordinary losses are disclosed on the income statement net of the tax benefit after discontinued operations but before the effect of changes in accounting methods. 2. Extraordinary gains are disclosed on the income statement net of taxes after discontinued operations but before the effect of changes in accounting methods. 3. The sale of inventory would be disclosed on the income statement (gross of taxes) as part of operating revenues. The associated cost of inventory sold would be disclosed on the income statement (gross of taxes) as part of operating expenses. 4. The loss on disposal of a business segment would be disclosed on the income statement net of taxes as part of discontinued operations, which is disclosed after income from continuing operations but before extraordinary items. 5. The income effect due to change in accounting method would be disclosed net of the tax effect on the income statement as the last item before net income. 6. 7. b. Advertising expense would be disclosed on the income statement (gross of taxes) as part of operations expenses. Income earned by the disposal of a business segment would be disclosed on the income statement net of taxes as part of discontinued operations, which is disclosed after income from continuing operations but before extraordinary items. Extraordinary items: Extraordinary loss (net of tax benefit of $87,500) Extraordinary gain (net of taxes of $19,250) Discontinued operations: Loss on disposal of business segment (net of tax benefit of $35,000) Income earned by disposed business segment (net of taxes of $52,500) Effect of change in accounting method (net of taxes of $28,000) (162,500) 35,750 (65,000) 97,500 52,000 P13–9 Concluded c. Income from continuing operations Disposal of business segment Extraordinary items Effect of changes in accounting method Net earnings per share a $0.16 = = b $(0.63) = = $ $ 3.00 0.16a (0.63)b 0.26 2.79 (Income from disposed segment – Loss on disposal) ÷ 200,000 shares ($97,500 – $65,000) ÷ 200,000 shares (Extraordinary gain – Extraordinary loss) ÷ 200,000 shares ($35,750 – $162,500) ÷ 200,000 shares P13–10 Microbiology Labs Income Statement For the Year Ended December 31, 2012 Sales revenue 10,000,000 Cost of goods sold 2,500,000 Gross profit 7,500,000 Operating expenses 750,000 Income from operations 6,750,000 Loss on sale of office equipment (60,000) $ _ $ $ Income from continuing operations (before taxes) 6,690,000 Income taxes 2,341,500 Income from continuing operations 4,348,500 Disposal of business segment: Gain on disposal of assets (net of taxes of $87,500) Income from operations of disposed segment (net of taxes of $52,500) Disposal of business segment 260,000 Income before extraordinary items 4,608,500 $ _ $ $ 162,500 97,500* $ Extraordinary items: Loss on retirement of bonds (net of tax benefit of $28,000) Loss due to insect infestation (net of tax benefit of $280,000) Extraordinary losses (572,...
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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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