Chapter 4: Question 24Q (page 180)
What effect does intraperiod tax allocation have on reported net income?
The intraperiod tax allocation decreases the reported net income of the business entity.
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Finley Corporation had income from continuing operations of
Question: At December 31, 2016, Shiga Naoya Corporation had the following stock outstanding.
10% cumulative preferred stock,
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.)
Explain the transaction approach to measuring income. Why is the transaction approach to income measurement preferable to other ways of measuring income?
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.)
Discuss the appropriate treatment in the financial statements of each of the following.
(a) Gain on sale of investment securities.
(b) A profit-sharing bonus to employees computed as a percentage of net income.
(c) Additional depreciation on factory machinery because of an error in computing depreciation for the previous year.
(d) Rent received from subletting a portion of the office space.
(e) A patent infringement suit, brought 2 years ago against the company by another company, was settled this year by a cash payment of $725,000.
(f) A reduction in the Allowance for Doubtful Accounts balance because the account appears to be considerably in excess of the probable loss from uncollectible receivables.
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