Problem 4–1
REED COMPANY
Comparative Income Statements
For the Years Ended December 31
2018 2017
Sales revenue …………………………………………………[1] $4,000,000 [6] $3,000,000
Operating expenses:
Administrative …………………………………………….[3] 750,000 [8] 635,000
Selling ………………………………………………………..[4] 340,000 [9] 282,000
Other income (expense):
Interest revenue ……………………………………………. 150,000 140,000
Interest expense …………………………………………… (200 ,000) (200 ,000)
Earnings per share:
PROBLEMS
Problem 4–1 (concluded)
[1] $4,400,000 – 400,000 (sales from discontinued operation)
[2] $2,860,000 – 290,000 (cost of goods sold from discontinued operations)
[3] $800,000 – 50,000 (administrative expenses from discontinued
operations)
Problem 4–2
Requirement 1
JACKSON HOLDING COMPANY
Comparative Income Statements (in part)
For the Years Ended December 31
2018 2017
Income from continuing operations before
income taxes [1] …………………………………… $2,200,000 $700,000
Income tax expense ………………………………….. 880 ,000 280 ,000
[1] Income from continuing operations before income taxes:
2018 2017
Unadjusted $2,600,000 $1,000,000
[2] Income from discontinued operations:
2018 2017
Income from operations $ 400,000 $300,000
Problem 4–2 (concluded)
Requirement 2
The 2018 income from discontinued operations would include only the
Since no impairment loss is indicated ($5,000,000 – 4,400,000 = $600,000
Requirement 3
The 2018 income from discontinued operations would include the income
from operations of $400,000 as well as an impairment loss of $500,000
Problem 4–3
MICRON CORPORATION
Partial Income Statement
For the Year Ended December 31, 2018
Income from continuing operations before
income taxes …………………………………….. [1] $1,300,000
Income tax expense ……………………………… 390 ,000
[1] Income from continuing operations before taxes:
Unadjusted $1,200,000
[2] Loss on discontinued operations:
Income from operations $ 160,000
Problem 4–4
1. Restructuring is an example of an event that is material and unusual.
2. The income from the discontinued operation should be presented, net of tax, in
3. The correction of the error should be treated as a prior period adjustment to
beginning retained earnings, not as an adjustment to current year’s cost of goods
Problem 4–5
ALEXIAN SYSTEMS, INC.
Income Statement
For the Year Ended December 31, 2018
($ in millions except per share data)
Operating expenses:
Selling and administrative ……………………………………… [2] $128
Other income:
Interest revenue ……………………………………………………. 3
Gain on sale of investments …………………………………… 6
[1] $270 – 5 (prior period adjustment)
Problem 4–6
REMBRANDT PAINT COMPANY
Income Statement
For the Year Ended December 31, 2018
($ in thousands, except per share amounts)
Sales revenue ………………………………………………. $18,000
Cost of goods sold ……………………………………….. 10 ,500
Problem 4–7
Requirement 1
SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2018
($ in 000s)
Sales revenue ………………………………………………………… $15,300
Operating expenses:
Other income (expense):
Income from continuing operations before income taxes 5,485
(including gain on disposal of $1,400) …………………. 840
Income tax expense ……………………………………………… (336 )
Problem 4–7 (concluded)
*Weighted-average shares = 1,000,000 + (400,000÷2) = 1,200,000
Note:
The depreciation expense error is a prior period adjustment (to retained earnings)
and is not reported in the income statement.
Requirement 2
SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2018
($ in 000s)
Net income …………………………………………………………….. $3,795
Other comprehensive income (loss):