Loss before income tax 3225000 Less Applicable income 750 2096250

Loss before income tax 3225000 less applicable income

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            Loss before income tax $3,225,000             Less: Applicable income tax (35%)   1,128,750    (2,096,250)       Net income $13,276,250 Preferred dividends declared: $  1,075,000 Weighted average common shares outstanding 4,000,000 Earnings per share       Income from continuing operations $3.57*       Discontinued operations, net of tax    (.52 )**       Net income $3.05 ***    *($15,372,500 – $1,075,000)  ÷  4,000,000. (Rounded)   **$2,096,250  ÷  4,000,000. (Rounded) ***($13,276,250 – $1,075,000)  ÷  4,000,000.
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EXERCISE 4-14 (15–20 minutes) (a)     2014         Income before income tax $450,000 Income tax (35%)   157,500 Net Income $292,500 (b) Cumulative effect for years prior to 2014. Year Weighted- Average     FIFO          Difference Tax Rate    (35%)        Net Effect 2012 $370,000 $395,000 $25,000 2013 390,000 430,000   40,000 Total $65,000 $22,750 $42,250 (c)       2014                 2013                 2012           Income before income tax $450,000 $430,00 0 $395,000 Income tax (35%)   157,500   150,50 0   138,250 Net income $292,500 $279,50 0 $256,750 EXERCISE 4-15 (15–20 minutes) (a) ROXANNE CARTER CORPORATION Statement of Comprehensive Income For the Year Ended December 31, 2014 Sales revenue ............................................................................. $1,200,000 Cost of goods sold .....................................................................      750,000 Gross profit ................................................................................. 450,000
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Selling and administrative expenses .......................................      320,000 Net income .................................................................................. 130,000 Unrealized holding gain, net of tax ...........................................        18,000 Comprehensive income ............................................................. $   148,000
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(b) ROXANNE CARTER CORPORATION Income Statement and Comprehensive Income Statement For the Year Ended December 31, 2014 Sales ............................................................................................ $1,200,000 Cost of goods sold .....................................................................      750,000 Gross profit ................................................................................. 450,000 Selling and administrative expenses .......................................      320,000 Net income .................................................................................. $   130,000 Comprehensive Income Net income .................................................................................. $   130,000 Unrealized holding gain .............................................................        18,000 Comprehensive income ............................................................. $   148,000 EXERCISE 4-16 (15–20 minutes) C. REITHER CO. Statement of Stockholders’ Equity For the Year Ended December 31, 2014 Total Retaine d Earning s Accumulated Other Comprehensiv e Income Common  Stock Beginning balance $520,00 0 $ 90,000 $80,000 $350,000 Comprehensive income     Net income* 120,000 120,000     Other comprehensive  income
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        Unrealized holding loss (60,000) (60,000) Comprehensive income Dividends   (10,000 )    (10,00 0 )                      Ending balance $570,00 0 $200,00 0 $20,000 $350,000 *($700,000 – $500,000 – $80,000). EXERCISE 4-17 (30–35 minutes) (a) ROLAND CARLSON INC. Income Statement For the Year Ended December 31, 2014 Revenues Sales revenue ............................................................................... ....................................................................................................... $1,900,000 Rent revenue .................................................................................        40,000 Total revenues ...................................................................   1,940,000 Expenses Cost of goods sold ............................................................ 850,000 Selling expenses ................................................................ 300,000 Administrative expenses ..................................................      240,000 Total expenses ..........................................................   1,390,000 Income from continuing operations before      income tax .................................................................... 550,000 Income tax ...............................................................      187,000 Income from continuing operations .............................. 363,000 Discontinued operations Loss on discontinued operations ......................... $75,000 Less: Applicable income tax reduction ................   25,500       (49,500) Income before extraordinary items ................................ 313,500 Extraordinary items: Extraordinary gain .................................................. 95,000 Less: Applicable income tax .................................   32,300        62,700
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376,200 Extraordinary loss .................................................. 60,000 Less: Applicable income tax reduction ................   20,400       (39,600) Net income ....................................................................... $   336,600
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