Prepare a multiple step income statement wileyplus

intHW3

(Computation of Net Income)

Presented below are changes in all the account balances of Jackson Furniture Co. during the current year, except for retained earnings.

Increase (Decrease)

Increase (Decrease)

Cash

$85,280

Accounts Payable

$(59,160)

Accounts Receivable (net)

49,330

Bonds Payable

83,160

Inventory

128,180

Common Stock

131,870

Investments

(47,780)

Additional Paid-in Capital

14,610

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 $22,300 which was paid in the current year.

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(Income Statement Items)

Presented below are certain account balances of Paczki Products Co.

Rental revenue

$6,540

Sales discounts

$7,870

Interest expense

12,940

Selling expenses

99,650

Beginning retained earnings

114,550

Sales

392,310

Ending retained earnings

134,450

Income tax

32,690

Dividend revenue

72,820

Cost of goods sold

184,560

Sales returns

12,990

Administrative expenses

83,500

From the foregoing, compute the following in a periodic inventory environment: (a) total net revenue, (b) net income, (c) dividends declared during the current year.

(a)

Total net revenue

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(b)

Net income

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(c)

Dividends declared

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(Multiple-step and Single-step)

Two accountants for the firm of Allen and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2012 information related to Webster Company ($000 omitted).

Administrative expense

Officer's salaries

$ 5,580

Depreciation of office furniture and equipment

4,060

Cost of goods sold

63,100

Rental revenue

23,190

Selling expense

Transportation-out

2,690

Sales commissions

7,980

Depreciation of sales equipment

6,480

Sales

98,400

Income tax

9,070

Interest expense

1,860

(a)

Prepare an income statement for the year 2012 using the multiple-step form. Common shares outstanding for 2012 total 40,550 (000 omitted). (List multiple entries from largest to smallest amount, e.g. 10, 5, 2. Round earnings per share to 2 decimal places, e.g. 0.25 and all other answers to zero decimal places, e.g. 2,250. Enter all amounts as positive amounts and subtract where necessary.)

WEBSTER COMPANY

Income Statement

For the Year Ended December 31, 2012

(In thousands, except earnings per share)

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Gross profit

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Operating Expenses

Selling Expenses

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Administrative expenses

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Income from operations

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Other Revenues and Gains

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Other Expenses and Losses

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Income before taxes

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Net income

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Earnings per share

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(b)

Prepare an income statement for the year 2012 using the single-step form. (List multiple entries from largest to smallest amount, e.g. 10, 5, 2. Round earnings per share to 2 decimal places, e.g. 0.25 and all other answers to zero decimal places, e.g. 2,250. Enter all amounts as positive amounts and subtract where necessary.)

WEBSTER COMPANY

Income Statement

For the Year Ended December 31, 2012

(In thousands, except earnings per share)

Revenues

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Total revenues

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Expenses

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Total expenses

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Income before taxes

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Net income

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Earnings per share

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(Multiple-step and Extraordinary Items)

The following balances were taken from the books of Parnevik Corp. on December 31, 2012.

Interest revenue

$94,200

Accumulated depreciation-building

28,000

Cash

51,000

Notes receivable

155,000

Sales

1,287,200

Selling expenses

203,700

Accounts receivable

150,000

Accounts payable

170,000

Prepaid insurance

20,000

Bonds payable

100,000

Sales returns and allowances

157,700

Administrative and general expenses

99,500

Allowance for doubtful accounts

7,000

Accrued liabilities

32,000

Sales discounts

45,400

Interest expense

71,900

Land

100,000

Notes payable

100,000

Equipment

200,000

Loss from earthquake damage

Building

140,000

(extraordinary item)

137,000

Cost of goods sold

627,900

Common stock

500,000

Accumulated depreciation-equipment

40,000

Retained earnings

21,000

Assume the total effective tax rate on all items is 34%.

Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year. (Round per share of common stock to 2 decimal places, e.g. 0.25 and all other answers to zero decimal places, e.g. 2,250. For per share of common stock use either a negative sign preceding the number, e.g. -0.45 or parenthesis e.g. (0.45) for negative numbers. Enter all other amounts as positive amounts and subtract where necessary. For multiple entries list from largest to smallest amounts, e.g. 10, 5, 1.)

PARNEVIK CORP.

Income Statement

For the Year Ended December 31, 2012

Sales Revenue

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Net sales revenue

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Gross profit

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Operating Expenses

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Income from operations

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Other Revenues and Gains

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Other Expenses and Losses

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Income before taxes and extraordinary item

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Income before extraordinary item

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Extraordinary item

Loss from earthquake damage

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Less applicable tax reduction

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Net income

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Per share common stock:

Income before extraordinary item

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Extraordinary item

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Net income

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(Income Statement, EPS)

Presented below are selected ledger accounts of McGraw Corporation as of December 31, 2012.

Cash

$ 50,000

Administrative expenses

100,000

Selling expenses

80,000

Net sales

548,900

Cost of goods sold

222,500

Cash dividends declared (2012)

20,000

Cash dividends paid (2012)

15,000

Discontinued operations (loss before income taxes)

40,200

Depreciation expense, not recorded in 2011

30,000

Retained earnings, December 31, 2011

90,000

Effective tax rate 30%

(a)

Compute net income for 2012. (List multiple entries from largest to smallest amount, e.g. 10, 5, 2. Enter all amounts as positive amounts and subtract where necessary.)

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Income before taxes

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Net income

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(b)

Prepare a partial income statement beginning with income from continuing operations before income tax, and including appropriate earnings per share information. Assume 20,000 shares of common stock were outstanding during 2012. (Round earnings per share to 2 decimal places, e.g. 5.25 and all other answers to zero decimal places, e.g. 2,250. For earnings per share use either a negative sign preceding the number, e.g. 0.45 or parenthesis, e.g. (0.45) for negative numbers. Enter all other amounts as positive amounts and subtract where necessary.)

Income from continuing operations before income tax

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Income from continuing operations

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Net income

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Earnings per share:

Income from continuing operations

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Loss on discontinued operations, net of tax

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Net income

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(Earnings Per Share)

The stockholders' equity section of Sosa Corporation appears below as of December 31, 2012.

6% preferred stock, $50 par value, authorized

101,040 shares, outstanding 91,040 shares

$4,552,000

Common stock, $1 par, authorized and issued 10.13 million shares

10,130,000

Additional paid-in capital

20,636,800

Retained earnings

$134,328,700

Net income

33,319,500

167,648,200

$202,967,000

Net income for 2012 reflects a total effective tax rate of 34%. Included in the net income figure is a loss of $12,827,300 (before tax) as a result of a major casualty, which should be classified as an extraordinary item. Preferred stock dividends of $273,120 were declared and paid in 2012. Dividends of $1,200,000 were declared and paid to common stockholders in 2012.

Compute earnings per share data as it should appear on the income statement of Sosa Corporation. (Round answers to 2 decimal places, e.g. 5.25. For negative numbers use either a negative sign preceding the number, e.g. -0.45 or parenthesis, e.g. (0.45).)

Per share of common stock:

Income before extraordinary item

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Net income

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(Retained Earnings Statement)

McEntire Corporation began operations on January 1, 2009. During its first 3 years of operations, McEntire reported net income and declared dividends as follows.

Net income

Dividends declared

2009

$49,400

$ -0-

2010

128,900

55,200

2011

161,700

52,700

The following information relates to 2012.

Income before income tax

$245,900

Prior period adjustment: understatement of 2010 depreciation expense (before taxes)

$29,300

Cumulative decrease in income from change in inventory methods (before taxes)

$35,100

Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2013)

$100,000

Effective tax rate

40%

(a)

Prepare a 2012 retained earnings statement for McEntire Corporation. (Enter all amounts as positive amounts and subtract where necessary.)

McENTIRE CORPORATION

Retained Earnings Statement

For the Year Ended December 31, 2012

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Correction for depreciation error (net of taxes)

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Balance, January 1, as adjusted

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Balance, December 31

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(b)

Assume McEntire Corp. restricted retained earnings in the amount of $70,000 on December 31, 2012. After this action, what would McEntire report as total retained earnings in its December 31, 2012, balance sheet?

Total retained earnings

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(Earnings per Share)

At December 31, 2011, Schroeder Corporation had the following stock outstanding.

8% cumulative preferred stock, $100 par, 107,582 shares

$10,758,200

Common stock, $5 par, 4,093,580 shares

20,467,900

During 2012, Schroeder's did not issue any additional stock. The following also occurred during 2012.

Income from continuing operations before taxes

$30,507,400

Discontinued operations (loss before taxes)

3,321,100

Preferred dividends declared

860,656

Common dividends declared

2,388,000

Effective tax rate

35%

Compute earnings per share data as it should appear in the 2012 income statement of Schroeder Corporation. (Round answers to 2 decimal place, e.g. 5.25. For negative numbers use either a negative sign preceding the number, e.g. -0.45 or parenthesis, e.g. (0.45).)

Earnings per share

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Net income

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(Change in Accounting Principle)

Zehms Company began operations in 2010 and adopted weighted-average pricing for inventory. In 2012, in accordance with other companies in its industry, Zehms changed its inventory pricing to FIFO. The pretax income data is reported below.

Year

Weighted- Average

FIFO

2010

$375,300

$413,100

2011

395,700

434,600

2012

416,400

476,500

(a)

What is Zehms's net income in 2012? Assume a 35% tax rate in all years. (Enter all amounts as positive amounts and subtract where necessary.)

2012

Income before income tax

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Income tax

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Net Income

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(b)

Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing. (Enter all amounts as positive amounts and subtract where necessary.)

Year

Weighted Average

FIFO

Difference

Tax Rate (35%)

Net Effect

2010

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2011

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Total

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(c)

Show comparative income statements for Zehms Company, beginning with income before income tax, as presented on the 2012 income statement. (Enter all amounts as positive amounts and subtract where necessary.)

2012

2011

2010

Income before income tax

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Income tax

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Net income

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(Comprehensive Income)

Armstrong Corporation reported the following for 2012: net sales $1,293,100; cost of goods sold $756,500; selling and administrative expenses $337,200; and an unrealized holding gain on available-for-sale securities $23,900.

Prepare a statement of comprehensive income, using the two-income statement format. Ignore income taxes and earnings per share. (Enter all amounts as positive amounts and subtract where necessary.)