Administrative expenses 35970 Interest expense 18000 Total expenses 1199525

Administrative expenses 35970 interest expense 18000

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Administrative expenses 35,970 Interest expense 18,000 Total expenses 1,199,525 Income before income tax 323,525 Income tax 102,000 Net income $ 221,525
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Earnings per common share $2.66 TWAIN CORPORATION Retained Earnings Statement For the Year Ended June 30, 2012 Retained earnings, July 1, 2011, as reported .... $337,000 Correction of depreciation understatement, net of tax ............................................................ (17,700 ) Retained earnings, July 1, 2011 as adjusted ..... $319,300 Add: Net income .................................................. 221,525 540,825 Less: Dividends declared on preferred stock... 9,000 Dividends declared on common stock .... 37,000 46,000 Retained earnings, June 30, 2012 ....................... $494,825 PROBLEM 4-7 WADE CORP. Income Statement (Partial) For the Year Ended December 31, 2012 Income from continuing operations before income tax $1,200,000* Income tax ..................................... 456,000 ** Income from continuing operations ..... 744,000 Discontinued operations Loss from operations of discontinued subsidiary ........... $ 90,000
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Less: Applicable income tax reduction .................... 34,200 $ 55,800 Loss from disposal of subsidiary.. 100,000 Less: Applicable income tax reduction ..................... 38,000 62,000 117,800 Income before extraordinary item ........ 626,200 Extraordinary item: Gain on condemnation ................. 125,000 Less: Applicable income tax ....... 50,000 75,000 Net income .............................................. $ 701,200 Per share of common stock: Income from continuing operations $4.96 Discontinued operations, net of tax (0.79 ) Income before extraordinary item 4.17 Extraordinary item, net of tax 0.50 Net income ($701,200 ÷ 150,000) $4.67 *Computation of income from continuing operations before income tax: As previously stated $1,210,000 Loss on sale of equipment [$40,000 – ($80,000 – $30,000)] (10,000 ) Restated $1,200,000
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**Computation of income tax expense: $1,200,000 X .38 = $456,000 Note : The error related to the intangible asset was correctly charged to retained earnings. EXERCISE 4-11 (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:
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Retained earnings: Appropriated ...................................................... $ 70,000 Unappropriated .................................................. 145,000 Total ............................................................... $215,000 EXERCISE 4-14 ARMSTRONG CORPORATION
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