Chapter 4: 7 (page 179)
How can earnings management affect the quality of earnings?
The quality of earnings is negatively affected by earnings management. Earnings management lowers the reliability element of income.
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
Perlman Land Development, Inc. purchased land for
Wade Corp. has 150,000 shares of common stock outstanding. In 2017, the company reports income from continuing operations before income tax of
1. In 2017, Wade Corp. sold equipment for
2. The company discontinued operations of one of its subsidiaries during the current year at a loss of \)190,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss from operations of the discontinued subsidiary was
3. An internal audit discovered that amortization of intangible assets was understated by \(35,000 (net of tax) in a prior period. The amount was charged against retained earnings.
4. The company recorded a non-recurring gain of \)125,000 on the condemnation of some of its property (included in the $1,210,000).
Instructions
Analyze the above information and prepare an income statement for the year 2017, starting with income from continuing operations before income tax. Compute earnings per share as it should be shown on the face of the income statement. (Assume a total effective tax rate of 38% on all items, unless otherwise indicated.)
Lebron Co. owns most but not all of the shares of its subsidiary Bryant Inc. Lebron reported net income of
(Multiple-Step and Single-Step Statements) The accountant of Latifa Shoe Co. has piled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2017.
Rent revenue \(29,000
Interest expense 18,000
Market appreciation on land above cost 31,000
Salaries and wages expense (selling) 114,800
Supplies (selling) 17,600
Income tax 37,400
Salaries and wages expense (administrative) \)135,900
Other administrative expenses 51,700
Cost of goods sold 496,000
Net sales 980,000
Depreciation on plant assets (70% selling, 30% administrative) 65,000
Cash dividends declared 16,000
There were 20,000 shares of common stock outstanding during the year.
Instructions
Finley Corporation had income from continuing operations of
What do you think about this solution?
We value your feedback to improve our textbook solutions.
