Chapter 4: Q4-1ISTQ (page 198)
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.
Option b is the correct answer.
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(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
Tim Mattke Company began operations in 2015 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2017, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below.
Year Weighted Average FIFO
2015 \(370,000 \)395,000
2016 390,000 \(430,000
2017 410,000 \)450,000
Instructions
Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2017 income statement.
Question: Willie Nelson, Jr., controller for Jenkins Corporation, is preparing the company’s financial statements at year-end. Currently, he is focusing on the income statement and determining the format for reporting comprehensive income. During the year, the company earned net income of \(400,000 and had unrealized gains on available-for-sale securities of \)15,000. In the previous year, net income was $410,000, and the company had no unrealized gains or losses.
Instructions
(a) Show how income and comprehensive income will be reported on a comparative basis for the current and prior years, using the two statement format.
(b) Show how income and comprehensive income will be reported on a comparative basis for the current and prior years, using the one statement format.
(c) Which format should Nelson recommend?
(Multiple-Step Statement with Retained Earnings Statement) Presented below is information related to Ivan Calderon Corp. for the year 2017.
Net sales $1,300,000 Write-off of inventory due to obsolescence 80,000
Cost of goods sold 780,000 Depreciation expense omitted by accident in 2016 55,000
Selling expenses 65,000 Casualty loss 50,000
Administrative expenses 48,000 Cash dividends declared 45,000
Dividend revenue 20,000 Retained earnings at December 31, 2016 980,000
Interest Revenue 7,000
Effective tax rate of 34% on all items
Instructions
Question: Below is the Retained Earnings account for the year 2017 for Acadian Corp.
Retained earnings, January 1, 2017 \(257,600
Add:
Gain on sale of investments (net of tax) \)41,200
Net income 84,500
Refund on litigation with government, related to
the year 2014 (net of tax) 21,600
Recognition of income earned in 2016, but omitted
from income statement in that year (net of tax) 25,400 172,700
430,300
Deduct:
Loss on discontinued operations (net of tax) 35,000
Write-off of goodwill (net of tax) 60,000
Cumulative effect on income of prior years in changing
from LIFO to FIFO inventory valuation in 2017 (net of tax) 23,200
Cash dividends declared 32,000 150,200
Retained earnings, December 31, 2017 $280,100
Instructions
(b) State where the items that do not appear in the corrected retained earnings statement should be shown
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