Problem 1

Selected information for Muffins Muffins Inc. for 2017 is presented below. All amounts are pretax. The effective tax rate is 30%.

Gain on sale of land 193,400

Selling expenses 287,600

Accounts receivable, net 632,900

Cumulative increase in income for reduced estimate of bad debts from

3.5% to 2.25% 71,800

Sales 5,130,000

Accumulated depreciation 1,526,300

Administrative expenses 387,600

Loss from operations of discontinued line of business $ 365,000

Dividend Income 58,000

Common stock, 240,000 shares 10,172,300

Interest expense 144,200

Unrealized holding loss on available-for-sales securities 171,300

Cumulative decrease in income from change in depreciation method 104,600

Inventory 3,029,000

Loss due to flooding 293,000

Gain on disposal of discontinued line of business 183,200

Retained earnings, beg balance 3,067,900

Failed to recognize interest on investment in 2016 114,800

Foreign currency translation gain 93,700

Bonds Payable 1,875,000

Accumulated other comprehensive income (CR bal) 749,120

Cumulative increase in income of change from FIFO to weighted average 63,600

Cost of goods sold 2,905,000

Dividends declared 129,500

Based on the above information, answer the following questions.

(HINT: Prepare a multi-step income statement and retained earnings statement. Youre welcome)

1. What amount would be reported for income from operations?

2. What amount would be reported in a 2017 income statement for income tax?

3. Prepare the discontinued operations section of the 2017 income statement.

4 On which financial statement(s) would the foreign currency translation gain be reported? (THINK!)

5. Should the cumulative increase in income of change from FIFO to weighted average be reported net of tax?

6. What amount would be reported for income from continuing operations?

7. What is comprehensive income for 2017?

8. Does the beginning balance of Retained Earnings need to be adjusted? If so, what is the adjusted amount?

9. On which financial statement(s) and in which section(s) would dividend income be reported?

10. What is the balance in accumulated other comprehensive income as of 12/31/17 and on which financial statement(s) is it reported? (THINK!)

11. On which financial statement(s) and in which section(s) would the adjustment for reduced estimate for bad debts be reported?

12 What amount would appear on a post-closing trial balance for Retained Earnings?

13 Prepare the earnings per share section of the 2017 income statement.