E1315 a kenningtoncompany incomestatement

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Unformatted text preview: ,000 Depreciation expense 250,000 Selling expenses 189,000 Total expenses _ 539,000 Income from operations $ Other revenues and expenses: 371,000 Rent revenue $ 360,000 Loss on sale of fixed assets (105,000) Total revenues and expenses 255,000 Income from continuing operations (before taxes) $ Income taxes _ Income from continuing operations $ Extraordinary loss (net of tax benefit of $70,700) _ Net income $ 626,000 219,100 406,900 (131,300) 275,600 b. Watson Company Statement of Retained Earnings For the Year Ended December 31, 2012 Retained earnings, January 1, 2012 $ other 847,000 Plus: Net income 275,600 Less: Dividends (460,000) Retained earnings, December 31, 2012 662,600 c. $ If Watson Company had no tax liability as of January 1, 2012, and made no tax payments during 2012, then the company's tax liability as of December 31, 2012 would equal the sum of the intraperiod tax allocations. Watson Company incurred $219,100 in taxes associated with income from continuing operations. The extraordinary loss provided a tax benefit, thereby reducing income taxes by $70,700. Therefore, the company's total tax liability as of December 31, 2012 would be $148,400. E13–15 a. Kennington Company Income Statement For the Year Ended December 31, 2012 Income from continuing operations (after taxes) $ 235,000 Loss on lawsuit (net of tax benefit of $21,700) (40,300) Income from continuing operations $ Gain on disposal of discontinued segment (net of tax expense of $8,750) 16,250 Extraordinary loss on early retirement of debt (net of tax benefit of $13,300) (24,700) (8,450) Net income 194,700 $ $ 186,250 Maximum dividends Kennington can declare = Income from continuing operations 15% $29,205 = $194,700 15% b. Kennington Company Income Statement For the Year Ended December 31, 2012 Income from continuing operations (after taxes) $ 235,000 Gain from sale of short­term investment (net of expense of $8,750) 16,250 Income from continuing operations $ Gain on disposal of discontinued segment Extraordinary loss on lawsuit, (net tax benefit of $21,700) (40,300) Extraordinary loss on early retirement of debt (net of tax benefit of $13,300) (24,700) (65,000) Net income 251,250 $ $ 186,250 Maximum dividends Kennington can declare = Income from continuing operations 15% $37,687.50 = $251,250 15% tax E13–16 a. Madigan International Income Statement For the Year Ended December 31, 2012 Income from continuing operations (before taxes) $ Gain on sale of subsidiary 42,000 Gain due to change in accounting principle 25,000 Income from continuing operations $ Income tax expense 865,000 $ 67,000 932,000 326,200a Income from continuing operations $ 605,800 Extraordinary items: Loss of inventory due to earthquake, (net tax benefit of $ (34,450) $18,550) Loss due to write­off of accounts receivable, (net tax benefit of (24,700) Extraordinary $13,300) items (59,150) Net income $ a b. 546,650 $326,200 = $932,000 35% Madigan’s accountants are not presenting income statement items in accordance with generally accepted accounting principles. Instead, they are presenting all the gain items as part of income from continuing operations and all the loss items as extraordinary. The intention is to represent to investors and other users a higher income from continuing operatio...
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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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