Chapter 4: Q32Q (page 181)
Question: What major types of items are reported in the retained earnings statement?
The opening balances of retained earnings, profit or loss of the last accounting period, and dividends payment are reported in the retained earnings statement.
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On January 1, 2017, Richards Inc. had cash and common stock of \(60,000. At that date, the company had no other asset, liability, or equity balances. On January 2, 2017, it purchased for cash \)20,000 of debt securities that it classified as available-for-sale. It received interest of \(3,000 during the year on these securities. In addition, it has an unrealized holding gain on these securities of \)4,000 net of tax. Determine the following amounts for 2017: (a) net income, (b) comprehensive income, (c) other comprehensive income, and (d) accumulated other comprehensive income (end of 2017).
(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
Identify at least two situations in which important changes in value are not reported in the income statement.
Which of the following is not reported in an income statement under IFRS?
(a) Discontinued operations.
(b) Extraordinary items.
(c) Cost of goods sold.
(d) Income tax.
Neumann Company computed earnings per share as follows.
Net income
_____________________________________
Common shares outstanding at year-end
Neumann has a simple capital structure. What possible errors might the company have made in the computation? Explain.
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