Chapter 4: Q4-4ISTQ (page 198)
The non-controlling interest section of the income statement is:
(a) required under GAAP but not under IFRS.
(b) required under IFRS but not under GAAP.
(c) required under IFRS and GAAP.
(d) not reported under GAAP or IFRS.
Option c is the correct answer.
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(Multiple-Step Statement, Retained Earnings Statement) The following information is related to Dickinson Company for 2017.
Retained earnings balance, January 1, 2017 \(980,000
Sales revenue 25,000,000
Cost of goods sold 16,000,000
Interest revenue 70,000
Selling and administrative expenses 4,700,000
Write-off of goodwill 820,000
Income taxes for 2017 1,244,000
Gain on the sale of investments 110,000
Loss due to flood damage 390,000
Loss on the disposition of the wholesale division (net of tax) 440,000
Loss on operations of the wholesale division (net of tax) 90,000XXX
Dividends declared on common stock \)250,000
Dividends declared on preferred stock 80,000
Dickinson Company decided to discontinue its entire wholesale operations (considered a discontinued operation) and to retain its manufacturing operations. On September 15, Dickinson sold the wholesale operations to Rogers Company. During 2017, there were 500,000 shares of common stock outstanding all year.
Instructions
Prepare a multiple-step income statement and a retained earnings statement.
What is meant by “tax allocation within a period”? What is the justification for such practice?
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?
Presented below is information related to Viel Company at December 31, 2017, the end of its first year of operations.
Sales revenue \(310,000
Cost of goods sold \)140,000
Selling and administrative expenses \(50,000
Gain on sale of plant assets \)30,000
Unrealized gain on available-for-sale investments \(10,000
Interest expense \)6,000
Loss on discontinued operations \(12,000
Dividends declared and paid \)5,000
Instructions
Compute the following: (a) income from operations, (b) net income, (c) comprehensive income, and (d) retained earnings balance at December 31, 2017. (Ignore income tax effects.)
Question: O’Malley Corporation was incorporated and began business on January 1, 2017. It has been successful and now requires a bank loan for additional working capital to finance expansion. The bank has requested an audited income statement for the year 2017. The accountant for O’Malley Corporation provides you with the following income statement which O’Malley plans to submit to the bank.
O’MALLEY CORPORATION
INCOME STATEMENT
Sales revenue \(850,000
Dividends 32,300
Gain on recovery of insurance proceeds from
earthquake loss 38,500
920,800
Less:
Selling expenses \)101,100
Cost of goods sold 510,000
Advertising expense 13,700
Loss on obsolescence of inventories 34,000
Loss on discontinued operations 48,600
Administrative expense 73,400 780,800
Income before income tax 140,000
Income tax 56,000
Net income $84,000
Instructions
Indicate the deficiencies in the income statement presented above. Assume that the corporation desires a single-step income statement.
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