Chapter 4: 3 (page 179)
Identify at least two situations in which important changes in value are not reported in the income statement.
Unrealized gains or losses on investments that are available for sale and changes in the fair values of long-term liabilities are not recognized in the income statement.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Indicate where the following items would ordinarily appear on the financial statements of Boleyn, Inc. for the year 2017.
(a) The service life of certain equipment was changed from 8 to 5 years. If a 5-year life had been used previously, additional depreciation of \(425,000 would have been charged.
(b) In 2017, a flood destroyed a warehouse that had a book value of \)1,600,000. Floods are rare in this locality.
(c) In 2017, the company wrote off $1,000,000 of inventory that was considered obsolete.
(d) In 2014, a supply warehouse with an expected useful life of 7 years was erroneously expensed.
(e) Boleyn, Inc. changed from weighted-average to FIFO inventory pricing.
Question: At December 31, 2016, Shiga Naoya Corporation had the following stock outstanding.
10% cumulative preferred stock, \(100 par, 107,500 shares \)10,750,000
Common stock, \(5 par, 4,000,000 shares 20,000,000
During 2017, Shiga Naoya did not issue any additional common stock. The following also occurred during 2017.
Income from continuing operations before taxes \)23,650,000
Discontinued operations (loss before taxes) \(3,225,000
Preferred dividends declared \)1,075,000
Common dividends declared $2,200,000
Effective tax rate 35%
Instructions
Compute earnings per share data as it should appear in the 2017 income statement of Shiga Naoya Corporation. (Round to two decimal places.)
Distinguish between the modified all-inclusive income statement and the current operating performance income statement. According to present generally accepted accounting principles, which is recommended? Explain.
(Income Statement, EPS) Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2017.
Cash $50,000
Administrative expenses 100,000
Selling expenses 80,000
Net sales 540,000
Cost of goods sold 210,000
Cash dividends declared (2017) 20,000
Cash dividends paid (2017) 15,000
Discontinued operations (loss before income taxes) 40,000
Depreciation expense, not recorded in 2016 30,000
Retained earnings, December 31, 2016 90,000
Effective tax rate 30%
Instructions
The following account balances were included in the trial balance of Twain Corporation at June 30, 2017.
Sales revenue \(1,578,500
Depreciation expense (office furniture and equipment) \)7,250
Sales discounts \(31,150
Cost of goods sold \)896,770
Property tax expense \(7,320
Salaries and wages expense (sales) \)56,260
Bad debt expense (selling) \(4,850
Sales commissions \)97,600
Maintenance and repairs expense (administration) \(9,130
Travel expense (salespersons) \)28,930
Delivery expense \(21,400
Office expense \)6,000
Entertainment expense \(14,820
Sales returns and allowances \)62,300
Telephone and Internet expense (sales) \(9,030
Dividends received \)38,000
Depreciation expense (sales equipment) \(4,980
Interest expense \)18,000
Maintenance and repairs expense (sales) \(6,200
Income tax expense \)102,000
Miscellaneous selling expenses \(4,715
Depreciation understatement due to error—2014 (net of tax) \)17,700
Office supplies used \(3,450
Telephone and Internet expense (administration) \)2,820
Dividends declared on preferred stock \(9,000
Dividends declared on common stock \)37,000
The Retained Earnings account had a balance of $337,000 at July 1, 2016. There are 80,000 shares of common stock outstanding.
Instructions
(a) Using the multiple-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2017.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
