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Unformatted text preview: t do not originate from profitability.
Comprehensive Income (the change to Accumulated Other Comprehensive Income) is reflected at the
bottom of the Income Statement, below the calculation of Net Income. Finally, the Statement of
Stockholders’ Equity will contain a column showing all the changes to Accumulated Other Comprehensive
Income (with the ending balance matching what is shown on the Balance Sheet). EXERCISES
a. Statement b. Classification c. Explanation 1. IS Other This is an example of a bookkeeping
entry without an underlying economic
event. Some are voluntary, some are
IS 5. IS N/A
Usual and frequent
Usual and frequent 6. IS Unusual or infrequent 7. IS Unusual and infrequent 8.
10. S E
Unusual or infrequent 11. IS Usual and frequent 12. IS Usual and frequent Wages are normal, recurring part of
Bad debts are a normal, recurring part
Sales of equipment are secondary to
Expropriation against a company
occurs rarely in the U.S. Dividend Revenue is secondary to
normal buying and selling activities of
Cost of goods sold is part of normal
Rent expense is part of normal
a. b. 1.
3 As the transactions move from 1 to 5, they move away from exchanges with owners toward exchanges
with third parties involving the company's central, ongoing activities. Stockholders and creditors are
considered providers of capital, and this financing provides capital that is necessary for the company to be
able to operate. However, the company does not exist to draw capital from the equity and debt investors;
instead, it exists to provide goods and/or services to other entities. Providing goods and/or services is
considered the company's operations. E13–3
a. (5 ) (1 )
For the Year Ended December 31, 2013 Fees earned
b. $ 50,000
$ 26,000 Comprehensive Income =
= Change in Equity from Nonowner Sources
Revenues – Expenses + Gains – Losses + Cumulative
$50,000 – $24,000 + 0 – 0
* Fees and expenses represent Smedley’s only nonowner changes in equity.
c. The two are equal because Smedley’s economic events/activities do not differ from those described in the
income statement. E13–4
a. (1 ) (2 ) (3 ) (4 ) b. Net income
Maximum Dividend = 20% $182,800
Income before change in accounting method
= 20% $130,800
Income before extraordinary items
= 20% $108,800
Net operating income
= 20% $150,000
= $30,000 The bank requires restrictions on dividend payments to increase the probability that Morton Manufacturing
will have sufficient cash to meet its interest and principal payments. More stringent restric...
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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.
- Fall '08