I need the following exercises and problem completed

exercises E4-7B, E4-11B

Problem P4-4B

c04BExercises.qxd 12/7/12 9:53 AM Page 1 B EXERCISES 2 E4-1B (Computation of Net Income) Presented below are changes in all the account balances of Chris Park Furniture Co. during the current year, except for retained earnings. Increase (Decrease) Cash Accounts Receivable (net) Inventory Investments $ 252,800 144,000 406,400 (150,400) Increase (Decrease) Accounts Payable Bonds Payable Common Stock Additional Paid-in Capital $(163,200) 262,400 400,000 41,600 Instructions Compute the net income for the current year, assuming that there were no entries in the Retained Earnings account except for net income and a dividend declaration of $60,800 which was paid in the current year. 2 6 E4-2B (Compute Income Measures) Presented below is information related to Copa Corporation at December 31, 2014, the end of its first year of operations. Sales revenue Cost of goods sold Interest expense Selling and administrative expenses Dividends declared and paid $536,000 363,000 31,500 110,500 10,000 Loss on sale of investments Allocation to non-controlling interest Unrealized gain on available-for-sale financial assets Gain on discontinued operations 5,000 23,000 16,000 18,000 Instructions Compute the following: (a) income from operations, (b) net income, (c) net income attributable to Copa Corporation controlling shareholders, (d) comprehensive income, and (e) retained earnings balance at December 31, 2014. 2 6 E4-3B (Income Statement Items) Presented below are certain account balances of Patel Products Co. Rental revenue $ 5,200 Interest expense 10,160 Beginning retained earnings 91,520 Ending retained earnings 107,200 Dividend revenue 56,800 Sales returns 9,920 Allocation to noncontrolling Interest 11,000 Sales discounts Selling expenses Sales Income tax Cost of goods sold Administrative expenses $ 6,240 79,520 312,000 24,800 147,520 66,000 Instructions From the foregoing, compute the following: (a) total net revenue, (b) net income, (c) dividends declared, and (d) income attributable to controlling shareholders during the current year. 2 E4-4B (Single-step Income Statement) The financial records of Leon Paul Inc. were destroyed by fire at the end of 2014. Fortunately the controller had kept certain statistical data related to the income statement as presented below. 1. 2. 3. 4. 5. 6. 7. 8. The beginning merchandise inventory was $184,000 and decreased 20% during the current year. Sales discounts amount to $34,000. 20,000 shares of common stock were outstanding for the entire year. Interest expense was $40,000. The income tax rate is 30%. Cost of goods sold amounts to $1,000,000. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales. Four-fifths of the operating expenses relate to sales activities. Operating expenses consist of selling and administrative expenses. Instructions From the foregoing information, prepare an income statement for the year 2014 in single-step form. 2 3 E4-5B (Multiple-step and Single-step) Two accountants for the accounting firm of Pham and Pun are arguing about the merits of presenting an income statement in a multiple-step versus a singlestep format. The discussion involves the following 2014 information related to Saghir Company ($000 omitted). 1 c04BExercises.qxd 2 12/7/12 9:54 AM Page 2 Chapter 4 Income Statement and Related Information Administrative expense Officers' salaries Depreciation of office furniture and equipment Cost of goods sold Rental revenue Selling expense Transportation-out Sales commissions Depreciation of sales equipment Sales Income tax Interest expense $ 6,860 5,544 84,798 24,122 3,766 11,172 9,072 135,100 12,698 2,604 Instructions (a) Prepare an income statement for the year 2014 using the multiple-step form. Common shares outstanding for 2014 total 40,550 (000 omitted). (b) Prepare an income statement for the year 2014 using the single-step form. (c) Which one do you prefer? Discuss. 3 4 E4-6B (Multiple-step and Extraordinary Items) The following balances were taken from the books of Schimank Corp. on December 31, 2014. Interest revenue Cash Sales Accounts receivable Prepaid insurance Sales returns and allowances Allowance for doubtful accounts Sales discounts Land Equipment Building Cost of goods sold $ 120,400 71,400 1,932,000 210,000 28,000 210,000 9,800 63,000 140,000 280,000 196,000 869,400 Accumulated depreciationequipment Accumulated depreciationbuilding Notes receivable Selling expenses Accounts payable Bonds payable Administrative and general expenses Accrued liabilities Interest expense Notes payable Loss from earthquake damage (extraordinary item) Common stock Retained earnings $ 56,000 39,200 217,000 271,600 238,000 140,000 135,800 44,800 84,000 140,000 210,000 700,000 29,400 Assume the total effective tax rate on all items is 34%. Instructions Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year. 2 3 E4-7B (Multiple-step and Single-step) The accountant of Tabel Shoe Co. has compiled the following information from the company's records as a basis for an income statement for the year ended December 31, 2014. Rental revenue Interest on notes payable Market appreciation on land above cost Wages and salariessales Materials and suppliessales Income tax Wages and salariesadministrative Other administrative expenses Cost of goods sold Net sales Depreciation on plant assets (70% selling, 30% administrative) Dividends declared There were 20,000 shares of common stock outstanding during the year. Instructions (a) Prepare a multiple-step income statement. (b) Prepare a single-step income statement. (c) Which format do you prefer? Discuss. $ 87,000 54,000 93,000 344,400 52,800 112,200 407,700 155,100 1,488,000 2,940,000 195,000 48,000 c04BExercises.qxd 12/7/12 9:54 AM Page 3 B Exercises 2 4 8 E4-8B (Income Statement, EPS) Presented below are selected ledger accounts of Tran Corporation as of December 31, 2014. Cash Administrative expenses Selling expenses Net sales Cost of goods sold Cash dividends declared (2014) Cash dividends paid (2014) Discontinued operations (loss before income taxes) Depreciation expense, not recorded in 2013 Retained earnings, December 31, 2013 Effective tax rate = 30% $ 125,000 250,000 200,000 1,350,000 525,000 50,000 37,500 100,000 75,000 225,000 Instructions (a) Compute net income for 2014. (b) Prepare a partial income statement beginning with income from continuing operations before income tax, and including appropriate earnings per share information. Assume 10,000 shares of common stock were outstanding during 2014. 3 4 5 7 8 E4-9B (Multiple-step Statement with Retained Earnings) Presented below is information related to Trieu Corp. for the year 2014. Net sales Cost of goods sold Selling expenses Administrative expenses Dividend revenue Interest revenue $2,600,000 1,560,000 130,000 96,000 40,000 14,000 Write-off of inventory due to obsolescence Depreciation expense omitted by accident in 2013 Casualty loss (extraordinary item) before taxes Dividends declared Retained earnings at December 31, 2013 Effective tax rate of 34% on all items $ 160,000 110,000 100,000 90,000 1,960,000 Instructions (a) Prepare a multiple-step income statement for 2014. Assume that 60,000 shares of common stock are outstanding. (b) Prepare a separate retained earnings statement for 2014. 7 E4-10B (Earnings Per Share) The stockholders' equity section of Udokah Corporation appears below as of December 31, 2014. 8% cumulative preferred stock, $10 par value, authorized 100,000 shares, outstanding 90,000 shares Common stock, $0.20 par, authorized and issued 10 million shares Additional paid-in capital Retained earnings Net income $ $26,800,000 6,600,000 900,000 2,000,000 4,100,000 33,400,000 $40,400,000 Net income for 2014 reflects a total effective tax rate of 34%. Included in the net income figure is a loss of $3,600,000 (before tax) as a result of a major casualty. Instructions Compute earnings per share data as it should appear on the income statement of Udokah Corporation. 3 4 5 7 E4-11B (Condensed Income StatementPeriodic Inventory Method) Presented below are selected ledger accounts of Vu Corporation at December 31, 2014. Cash Merchandise inventory Sales Advances from customers Purchases Sales discounts Purchase discounts Sales salaries Office salaries Purchase returns Sales returns Transportation-in Accounts receivable Sales commissions $ 92,500 267,500 2,137,500 58,500 1,393,000 17,000 13,500 142,000 173,000 7,500 39,500 36,000 71,250 41,500 Travel and entertainmentsales Accounting and legal services Insurance expenseoffice Advertising Transportation-out Depreciation of office equipment Depreciation of sales equipment Telephonesales Utilitiesoffice Miscellaneous office expenses Rental revenue Extraordinary loss (before tax) Interest expense Common stock ($10 par) $ 34,500 16,500 12,000 27,000 46,500 24,000 18,000 8,500 16,000 4,000 120,000 35,000 88,000 450,000 3 c04BExercises.qxd 4 12/7/12 9:54 AM Page 4 Chapter 4 Income Statement and Related Information Vu's effective tax rate on all items is 34%. A physical inventory indicates that the ending inventory is $343,000. Instructions Prepare a condensed 2014 income statement for Vu Corporation. 8 E4-12B (Retained Earnings Statement) Jason Woo Corporation began operations on January 1, 2012. During its first 3 years of operations, Woo reported net income and declared dividends as follows. Net income 2012 2013 2014 $160,000 500,000 640,000 Dividends declared $ -0- 200,000 200,000 The following information relates to 2014. Income before income tax Prior period adjustment: understatement of 2013 depreciation expense (before taxes) Cumulative decrease in income from change in inventory methods (before taxes) Dividends declared (of this amount, $100,000 will be paid on Jan. 15, 2015) Effective tax rate $960,000 $100,000 $140,000 $400,000 40% Instructions (a) Prepare a 2014 retained earnings statement for Jason Woo Corporation. (b) Assume Jason Woo Corp. restricted retained earnings in the amount of $280,000 on December 31, 2014. After this action, what would Woo report as total retained earnings in its December 31, 2014, balance sheet? 4 5 7 E4-13B (Earnings per Share) At December 31, 2013, Shulo Corporation had the following stock outstanding. 10% cumulative preferred stock, $100 par, 202,000 shares Common stock, $1 par, 4,000,000 shares $20,200,000 4,000,000 During 2014, Shulo did not issue any additional common stock. The following also occurred during 2014. Income from continuing operations before taxes Discontinued operations (income before taxes) Preferred dividends declared Common dividends declared Effective tax rate $61,500,000 6,500,000 2,020,000 1,800,000 40% Instructions Compute earnings per share data as it should appear in the 2014 income statement of Shulo Corporation. (Round to two decimal places.) 4 5 7 E4-14B (Change in Accounting Principle) Tom Zuluaga Company placed an asset in service on January 2, 2012. Its cost was $1,350,000 with an estimated service life of 6 years. Salvage value was estimated to be $90,000. Using the double-declining-balance method of depreciation, the depreciation for 2012, 2013, and 2014 would be $450,000, $300,000, and $200,000 respectively. During 2014 the company's management decided to change to the straight-line method of depreciation. Assume a 35% tax rate. Instructions (a) How much depreciation expense will be reported in the income from continuing operations of the company's income statement for 2014? (Hint: Use the new depreciation in the current year.) (b) What amount will be reported as an adjustment to the beginning balance of retained earnings to reflect the effect of the change in accounting principle? 3 9 E4-15B (Comprehensive Income) Ari Corporation reported the following for 2014: net sales $6,000,000; cost of goods sold $3,750,000; selling and administrative expenses $1,600,000; and an unrealized holding gain on available-for-sale securities $90,000. Instructions Prepare a statement of comprehensive income, using (a) the one statement format, and (b) the two-income statement format. Ignore income taxes and earnings per share. 8 9 E4-16B (Comprehensive Income) Calvo Co. reports the following information for 2014: sales revenue $350,000; cost of goods sold $250,000; operating expenses $40,000; and an unrealized holding loss on available-for-sale securities for 2014 of $30,000. It declared and paid a cash dividend of $5,000 in 2014. c04BExercises.qxd 12/7/12 9:54 AM Page 5 B Exercises Calvo Co. has January 1, 2014, balances in common stock $175,000; accumulated other comprehensive income $40,000; and retained earnings $45,000. It issued no stock during 2014. Instructions Prepare a statement of stockholders' equity. 2 4 5 7 8 9 E4-17B (Various Reporting Formats) The following information was taken from the records of Cantu Inc. for the year 2014. Income tax applicable to income from continuing operations $261,800; income tax applicable to loss on discontinued operations $35,700; income tax applicable to extraordinary gain $45,220; income tax applicable to extraordinary loss $28,560; and unrealized holding gain on available-for-sale securities $21,000. Extraordinary gain Loss on discontinued operations Administrative expenses Rent revenue Extraordinary loss $133,000 105,000 336,000 56,000 84,000 Cash dividends declared Retained earnings January 1, 2014 Cost of goods sold Selling expenses Sales Shares outstanding during 2014 were 100,000. Instructions (a) Prepare a multiple-step income statement for 2014. (b) Prepare a retained earnings statement for 2014. (c) Show how comprehensive income is reported using the one statement format. $ 210,000 840,000 1,190,000 420,000 2,660,000 5 c04BProblems.indd Page 1 07/12/12 2:21 PM user-f409 B PROBLEMS 3 4 5 6 7 P4-1B (Multiple-Step Income, Retained Earnings) Presented below is information related to Marlin Company for 2014. Retained earnings balance, January 1, 2014 Sales revenue Cost of goods sold Interest revenue Selling and administrative expenses Write-off of goodwill Income taxes for 2014 Loss on the sale of investments (normal recurring) Loss due to hurricane damageextraordinary item (net of tax) Gain on the disposition of the retail division (net of tax) Loss on operations of the retail division (net of tax) Dividends declared on common stock Dividends declared on preferred stock $ 2,250,000 53,000,000 33,000,000 120,000 8,900,000 2,100,000 3,650,000 53,000 1,100,000 23,000 231,000 350,000 125,000 Instructions Prepare a multiple-step income statement and a retained earnings statement. Marlin Company decided to discontinue its entire retail operations and to retain its manufacturing and wholesale operations. On September 15, Marlin sold the retail operations to Shark Corp. During 2014, there were 700,000 shares of common stock outstanding all year. 2 6 7 P4-2B (Single-Step Income, Retained Earnings, Periodic Inventory) Presented below is the trial balance of Dunn Corporation at December 31, 2014. DUNN CORPORATION TRIAL BALANCE DECEMBER 31, 2014 Debits Cash Accounts Receivable Rent Revenue Retained Earnings Sales Returns and Allowances Salaries and Wages Payable Common Stock Sales Revenue Accumulated DepreciationEquipment Purchase Discounts Sales Discounts Notes Receivable Notes Payable $ Credits 25,200 175,000 $ 65,000 132,,500 21,600 6,000 100,000 2,250,000 31,000 16,000 9,400 5,000 75,000 Inventory Selling Expenses Loss on Sale of Land Accumulated DepreciationBuildings Administrative Expenses 235,000 311,000 15,000 Supplies Freight-in Land Equipment Income Tax Expense Cash Dividends Allowance for Doubtful Accounts Bonds Payable Accounts Payable 13,000 8,000 80,000 165,000 91,900 60,000 Buildings Purchases Totals 33,600 138,000 15,000 200,000 136,000 212,000 1,430,000 $2,995,100 $2,995,100 1 c04BProblems.indd Page 2 07/12/12 2:21 PM user-f409 2 Chapter 4 Income Statement and Related Information A physical count of inventory on December 31 resulted in an inventory amount of $196,000; thus, cost of goods sold for 2014 is $1,461,000. Instructions Prepare a single-step income statement and a retained earnings statement. Assume that the only changes in retained earnings during the current year were from net income and dividends. One hundred thousand shares of common stock were outstanding the entire year. 4 5 6 P4-3B (Irregular Items) Vanpop Inc. reported income from continuing operations before taxes during 2014 of $463,000. Additional transactions occurring in 2014 but not considered in the $463,000 are as follows. 1. The corporation experienced an uninsured hurricane loss (extraordinary) in the amount of $130,000 during the year. The tax rate on this item is 40%. 2. At the beginning of 2012, the corporation purchased equipment for $62,000 (salvage value of $6,000) that had a useful life of 10 years. The bookkeeper used straight-line depreciation for 2012, 2013, and 2014 but incorrectly used a 7 year useful life in determining the deprecation amount. 3. Sale of securities held as a part of its portfolio resulted in a gain of $40,000 (pretax). 4. When its chairman of the board died, the corporation realized $500,000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $410,000 (the gain is nontaxable). 5. The corporation disposed of its consumer division at a loss of $210,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. 6. The corporation decided to change its method of inventory pricing from average cost to the FIFO method. The effect of this change on prior years is to increase 2012 income by $86,000 and increase 2013 income by $43,000 before taxes. The FIFO method has been used for 2014. The tax rate on these items is 40%. Instructions Prepare an income statement for the year 2014 starting with income from continuing operations before taxes. Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 200,000 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.) 4 5 6 7 P4-4B (Multiple- and Single-Step Income, Retained Earnings) The following account balances were included in the trial balance of Castle Corporation at June 30,2014. Sales revenue Sales discounts Cost of goods sold Salaries and wages expense (sales) Sales commissions Travel expense (salespersons) Freight-out Entertainment expense Telephone and Internet expense (sales) Depreciation expense (sales equipment) Maintenance and repairs expense (sales) Miscellaneous expenses (sales) Office supplies used Telephone and Internet expense (administration) $2,100,500 12,680 1,490,300 54,600 135,800 41,600 31,100 21,930 11,300 3,500 2,900 6,570 2,900 4,900 Depreciation expense (office furniture and equipment) Property tax expense Bad debt expense (selling) Maintenance and repairs expense (administration) Office expense Sales returns and allowances Dividends received Interest expense Income tax expense Depreciation overstatement due to error-2012 (net of tax) Dividends declared on preferred stock Dividends declared on common stock $ 8,680 12,900 8,630 4,860 7,500 36,870 21,000 37,500 68,000 31,000 15,000 45,000 The Retained Earnings account had a balance of $468,000 at July 1, 2013. There are 150,000 shares of common stock outstanding. Instructions (a) Using the multiple-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2014. (b) Using the single-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2014. c04BProblems.indd Page 3 07/12/12 2:21 PM user-f409 B Problems 3 4 5 6 P4-5B (Irregular Items) Presented below is a combined single-step income and retained earnings statement for OFD Company for 2014. Net sales Costs and expenses Cost of goods sold Selling, general, and administrative expenses Other, net $860,000 $ 600,000 121,000 12,000 Income before income tax Income tax Net income Retained earnings at beginning of period, as previously reported Adjustment required for correction of error 733,000 127,000 43,400 84,600 210,000 11,000 Retained earnings at beginning of period, as restated Dividends on common stock 231,000 (52,500) Retained earnings at end of period . $263,100 Additional facts are as follows. 1. \"Selling, general, and administrative expenses\" for 2014 included a charge of $11,000,000 that was usual but infrequently occurring. 2. \"Other, net\" for 2014 included an extraordinary item (gain) of $8,500,000. If the extraordinary item (charge) had not occurred, income taxes for 2014 would have been $40,200,000 instead of $43,400,000. 3. \"Adjustment required for correction of an error\" was a result of a change in estimate (useful life of certain assets reduced to 8 years and a catch-up adjustment made). 4. OFD Company disclosed earnings per common share for net income in the notes to the financial statements. Instructions Determine from these additional facts whether the presentation of the facts in the OFD Company income and retained earnings statement is appropriate. If the presentation is not appropriate, describe the appropriate presentation and discuss its theoretical rationale. (Do not prepare a revised statement.) 3 4 6 7 P4-6B (Retained Earnings Statement, Prior Period Adjustment) Below is the Retained Earnings account for the year 2014 for Cooper Corp. Retained earnings, January 1 , 2014 Add: Gain on discontinued operations (net of tax) Net income Gain on sale of investments (net of tax) Cumulative effect on income of prior years in changing from LIFO to FIFO inventory valuation in 2014 (net of tax) Refund on litigation with government, related to the year 2011 (net of tax) Recognition of income earned in 2013 , but omitted from income statement in that year (net of tax) $616,050 $ 12,000 168,300 41,200 52,600 51,600 49,700 375,400 991,450 Deduct: Write-off of goodwill (net of tax) Cash dividends declared Retained earnings, December 31 , 2014 250,000 60,000 310,000 $681,450 Instructions (a) Prepare a corrected retained earnings statement. Cooper Corp. normally sells investments of the type mentioned above. FIFO inventory was used in 2014 to compute net income.. (b) State where the items that do not appear in the corrected retained earnings statement should be shown. c04BProblems.indd Page 4 07/12/12 2:21 PM user-f409 4 Chapter 4 Income Statement and Related Information 4 5 6 7 P4-7B (Income Statement, Irregular Items) Rafter Corp. has 400,000 shares of common stock outstanding. In 2014, the company reports income from continuing operations before income tax of $2,680,000. Additional transactions not considered in the $2,680,000 are as follows. 1. In 2014, Rafter Corp. sold available-for-sale investments for $86,000. The investments had originally cost $80,000. The gain or loss is considered ordinary. 2. The company discontinued operations of one of its subsidiaries during the current year at a loss of $450,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss from operations of the discontinued subsidiary was $390,000 before taxes; the loss from disposal of the subsidiary was $60,000 before taxes. 3. An internal audit discovered that deprecition of equipment was overstated by $40,000 (net of tax) in a prior period. The amount was charged against retained earnings. 4. The company had a loss of $60,000 on the condemnation of much of its property. The loss is taxed at a total effective rate of 40%. Assume that the transaction meets the requirements of an extraordinary item. Instructions Analyze the above information and prepare an income statement for the year 2014, 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 30% on all items, unless otherwise indicated.)