Subject: Business    / Accounting
Exercise 4­2 Presented below is information related to Shamrock Company at December 31, 2017, the end of its first year of operations.
Sales revenue
Cost of goods sold $327,980
148,580 Selling and administrative expenses 52,100 Gain on sale of plant assets 30,840 Unrealized gain on available-for-sale investments 9,370 Interest expense 6,060 Loss on discontinued operations 11,970 Dividends declared and paid 5,190 Compute the following:
(a) Income from operations $
(b) Net income $
(c) Comprehensive income $
(d) Retained earnings balance at December 31, 2017 Exercise 4­6
The following balances were taken from the books of Swifty Corp. on December 31, 2017.
Interest revenue
Sales revenue
Accounts receivable
Prepaid insurance
Sales returns and allowances
Allowance for doubtful accounts
Sales discounts
Land $88,000
53,000 Accumulated depreciation—equipment
Accumulated depreciation—buildings 1,382,000 Notes receivable 152,000 Selling expenses 22,000
102,000 Accounts payable
Bonds payable
Administrative and general expenses
Accrued liabilities
Interest expense Equipment 202,000 Notes payable Buildings 142,000 Loss from earthquake damage Cost of goods sold 623,000 Common stock
Retained earnings 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 earnings per share to 2 decimal places, e.g. 1.48.) Exercise 4-9
Presented below is information related to Concord Corp. for the year 2017.
Net sales $1,361,900 Cost of goods sold 782,000 Write-off of inventory due to obsolescence
Depreciation expense omitted by accident in 2016 Selling expenses 69,500 Casualty loss Administrative expenses 55,000 Cash dividends declared Dividend revenue 20,100 Retained earnings at December 31, 2016 Interest revenue 7,160 Effective tax rate of 34% on all items Prepare a multiple-step income statement for 2017. Assume that 63,980 shares of
common stock are outstanding. (Round earnings per share to 2 decimal places,
e.g. 1.49.) Exercise 4-10
The stockholders’ equity section of Coronado Corporation appears below as of December 31,
8% preferred stock, $50 par value, authorized
101,754 shares, outstanding 91,754 shares
Common stock, $1.00 par, authorized and issued 10,827,200 shares
Additional paid-in capital
Retained earnings
Net income Net income for 2017 reflects a total effective tax rate of 34%. Included in the net income figure
is a loss of $12,341,100 (before tax) as a result of a non-recurring major casualty. Preferred
stock dividends of $367,016 were declared and paid in 2017. Dividends of $965,400 were
declared and paid to common stockholders in 2017.
Compute earnings per share data as it should appear on the income statement of Coronado
Corporation. (Round answers to 2 decimal places, e.g. 1.48.) $134,576 33,000 Earnings Per
Net Income / (Loss) Exercise 4-12
Nash Corporation began operations on January 1, 2014. During its first 3 years of
operations, Nash reported net income and declared dividends as follows.
Net income Dividends declared 2014 $49,500 $ –0– 2015 128,600 59,600 2016 161,000 58,800 The following information relates to 2017.
Income before income tax
Prior period adjustment: understatement of 2015 depreciation expense (before taxes)
Cumulative decrease in income from change in inventory methods (before taxes)
Dividends declared (of this amount, $32,000 will be paid on January 15, 2018)
Effective tax rate Prepare a 2017 retained earnings statement for Nash Corporation. (List items that
increase adjusted retained earnings first.)
Retained Earnings
Statement $ Exercise 4-14
Tamarisk Company began operations in 2015 and for simplicity reasons, adopted
weighted-average pricing for inventory. In 2017, in accordance with other companies in
its industry, Tamarisk changed its inventory pricing to FIFO. The pretax income data is
reported below.
Year Weighted-Average FIFO 2015 $382,100 $398,800 2016 398,700 426,900 2017 421,100 466,900 What is Tamarisk’s net income in 2017? Assume a 35% tax rate in all years.
Net Income Compute the cumulative effect of the change in accounting principle from weightedaverage to FIFO inventory pricing.
effect Show comparative income statements for Tamarisk Company, beginning with income
before income tax, as presented on the 2017 income statement.
$ 2016
$ 2015
$ $ $ $ Income before income tax
Income tax
Net income Exercise 4-15
Concord Corporation reported the following for 2017: net sales $1,235,200, cost of goods
sold $721,800, selling and administrative expenses $338,600, and an unrealized holding
gain on available-for-sale securities $15,700. Prepare a statement of comprehensive income using one statement format. (Ignore
income taxes and earnings per share.)
Statement of Comprehensive
Income $ $ Prepare a statement of comprehensive income, using the two statement format. (Ignore
income taxes and earnings per share.)
Income Statement $ $ Comprehensive Income
$ $ Problem 4-3
Monty Inc. reported income from continuing operations before taxes during 2017 of $798,000.
Additional transactions occurring in 2017 but not considered in the $798,000 are as follows.
1. The corporation experienced an uninsured flood loss in the amount of $94,400 during the
year. 2. At the beginning of 2015, the corporation purchased a machine for $57,600 (salvage value of $9,600) that had a useful life of 6 years. The bookkeeper used straight-line
depreciation for 2015, 2016, and 2017, but failed to deduct the salvage value in
computing the depreciation base.
3. Sale of securities held as a part of its portfolio resulted in a loss of $55,100 (pretax). 4. When its president died, the corporation realized $147,700 from an insurance policy. The
cash surrender value of this policy had been carried on the books as an investment in the
amount of $43,110 (the gain is nontaxable). 5. The corporation disposed of its recreational division at a loss of $111,960 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 2015 income by
$60,690 and decrease 2016 income by $19,830 before taxes. The FIFO method has been
used for 2017. The tax rate on these items is 40%. Prepare an income statement for the year 2017 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 126,190 shares. (Assume a
tax rate of 30% on all items, unless indicated otherwise.) (Round earnings per share to 2
decimal places, e.g. 1.48 and all other answers to 0 decimal places, e.g. 5,275.)
Income Statement
(Partial) $ Problem 4-6
Below is the Retained Earnings account for the year 2017 for Martinez Corp.
Retained earnings, January 1, 2017 $258 Add:
Gain on sale of investments (net of tax) $42,140 Net income 85,440 Refund on litigation with government, related to the year 2014 (net of tax) 22,540 Recognition of income earned in 2016, but omitted from income
statement in that year (net of tax) 26,340 176 435
Loss on discontinued operations (net of tax) 35,940 Write-off of goodwill (net of tax) 60,940 Cumulative effect on income of prior years in changing from
LIFO to FIFO inventory valuation in 2017 (net of tax) 24,140 Cash dividends declared 32,940 Retained earnings, December 31, 2017
(a) Prepare a corrected retained earnings statement. Martinez Corp. normally sells
investments of the type mentioned above. FIFO inventory was used in 2017 to compute net
income. (List items that increase adjusted retained earnings first.)
Retained Earnings
Statement $ : : 153 $281 $

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