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.
Cash
Accounts Receivable (net)
Inventory
Investments
Increase
(Decrease)
$85,280
49,330
128,180
(47,780)
Accounts Payable
Bonds Payable
Common Stock
Additional Paid-in Capital
Increase
(Decrease)
$(59,160)
83,160
131,870
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.
$
(Income Statement Items)
Presented below are certain account balances of Paczki Products Co.
Rental revenue
Interest expense
Beginning retained earnings
Ending retained earnings
Dividend revenue
Sales returns
$6,540
12,940
114,550
134,450
72,820
12,990
Sales discounts
Selling expenses
Sales
Income tax
Cost of goods sold
Administrative expenses
$7,870
99,650
392,310
32,690
184,560
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
(b) Net income
(c) Dividends declared
$
$
$
(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
Depreciation of office furniture and equipment
$ 5,580
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)
$
Gross profit
Operating Expenses
Selling Expenses
$
Administrative expenses
Income from operations
Other Revenues and Gains
Other Expenses and Losses
Income before taxes
Net income
Earnings per share
$
$
(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
$
Total revenues
Expenses
Total expenses
Income before taxes
Net income
$
Earnings per share
$
(Multiple-step and Extraordinary Items)
The following balances were taken from the books of Parnevik Corp. on December 31, 2012.
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
Accumulated depreciationequipment
$94,200
51,000
1,287,200
150,000
20,000
157,700
7,000
45,400
100,000
200,000
140,000
627,900
40,000
Accumulated depreciation-building
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
28,000
155,000
203,700
170,000
100,000
99,500
32,000
71,900
100,000
137,000
500,000
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
$
Less:
$
Net sales revenue
Gross profit
Operating Expenses
Income from operations
Other Revenues and Gains
Other Expenses and Losses
Income before taxes and extraordinary item
Income before extraordinary item
Extraordinary item
Loss from earthquake damage
Less applicable tax reduction
Net income
$
Per share common stock:
Income before extraordinary item
$
Extraordinary item
Net income
$
(Income Statement, EPS)
Presented below are selected ledger accounts of McGraw Corporation as of December 31, 2012.
Cash
Administrative expenses
Selling expenses
Net sales
Cost of goods sold
Cash dividends declared (2012)
$ 50,000
100,000
80,000
548,900
222,500
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.)
$
Less:
Income before taxes
$
Net income
(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
$
Less:
Income from continuing operations
Net income
Earnings per share:
$
Income from continuing operations
$
Loss on discontinued operations, net of tax
Net income
$
(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
Common stock, $1 par, authorized and issued 10.13 million
shares
$4,552,000
10,130,000
Additional paid-in capital
Retained earnings
Net income
20,636,800
$134,328,700
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
Net income
$
$
(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.
2009
2010
2011
Net income
$49,400
128,900
161,700
Dividends declared
$ -055,200
52,700
The following information relates to 2012.
Income before income tax
$245,900
Prior period adjustment: understatement of 2010 depreciation expense (before
$29,300
taxes)
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
$
Correction for depreciation error (net of taxes)
Balance, January 1, as adjusted
Add:
Deduct:
Balance, December 31
$
(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
$
(Earnings per Share)
At December 31, 2011, Schroeder Corporation had the following stock outstanding.
8% cumulative preferred stock, $100 par, 107,582 shares
Common stock, $5 par, 4,093,580 shares
$10,758,200
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
Discontinued operations (loss before taxes)
Preferred dividends declared
Common dividends declared
Effective tax rate
$30,507,400
3,321,100
860,656
2,388,000
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
$
Net income
$
(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.
WeightedYear
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
$
Income tax
Net Income
$
(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.)
Weighted
Year
Average
FIFO
Difference
Tax Rate (35%)
Net Effect
2010
$
$
$
2011
Total
$
$
$
(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
$
$
$
$
$
$
Income tax
Net income
(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 availablefor-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.)
ARMSTRONG CORPORATION
Income Statement and Statement of Comprehensive Income
For the Year Ended December 31, 2012
$
Gross Profit
Net income
Net income
$
$
Unrealized holding gain
Comprehensive income
$