(continued) P 11-53A
Req. 2
Natural Foods, Inc.
Statement of Comprehensive Income
Year Ended June 30, 2016
Net income …………………………………………………………………..
$182,000
Other comprehensive income:
(25-35 min.) P 11-54A
Req. 1
Pretax accounting income of 2016 ………………………..
$230,000
+
Additional taxable income for income
earned in 2017 that is taxed in 2016 ………………….
13,000
Additional depreciation expense for
MACRS tax depreciation …………………………………..
Req. 2
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2016
Income Tax Expense ($230,000 × .32) …………
73,600
Deferred Tax Liability ($20,000 × .32) …….
Req. 3
Elemental Publications, Inc.
Income Statement
Year Ended December 31, 2016
Total revenue ………………………………….
$910,000
Expenses:
Cost of goods sold ……………………..
$480,000
Operating expenses ……………………
Income tax expense ……………………
Total expenses…………………………...
(20-30 min.) P 11-55B
Req. 1
Clark Cosmetics, Inc.
Income Statement
Year Ended December 31, 2016
Revenues:
Sales revenue …………………………………………………
$542,000
Dividend revenue ……………………………………………
14,000
Gain on lawsuit settlement ………………………………
8,000
Total revenues …………………………………………….
564,000
Expenses and losses:
Cost of goods sold ………………………………………….
$306,000
Selling expenses …………………………………………….
83,000
General expenses……………………………………………
Interest expense ……………………………………………..
Loss on sale of plant assets …………………………….
Income tax expense ………………………………………..
26,440
Total expenses and losses …………………………...
524,340
Income from continuing operations ……………………..
Income from discontinued operations,
$16,000, less income tax, $6,320 ………………………
.
(continued) P 11-55B
Req. 1 (continued)
Earnings per share:
Income from continuing operations
[($39,660 – $4,000* / 22,000**] ………………………………………..
$1.62
Income from discontinued operations ($9,680 / 22,000) ……..
.44
Net income [($49,340 − $4,000) / 22,000] …………………………...
$2.06
Req. 2
The company hoped to earn income from continuing operations equal
(10-15 min.) P 11-56B
Clark Cosmetics, Inc
Statement of Retained Earnings
Year Ended December 31, 2016
Retained earnings balance, December 31, 2015
as originally reported ………………………………………………….
$198,000
Prior-period adjustment (debit) ………………………………………..
(8,000)
Retained earnings balance, December 31, 2015
as adjusted ………………………………………………………………..
190,000
Net income for 2016 …………………………………………………………
Subtotal
239,340
Dividends declared for 2016 …………………………………………….
(10-15 min. — after working P 11-55B) P 11-57B
Estimated value
of Clark
common stock
Estimated annual
Income from continuing
=
income in the future
=
operations ($39,660)
=
$396,600
Investment
.10
capitalization rate
Current market value
of Clark
= $462,000 (22,000 shares *× $21 per share)
common stock
(30-40 min.) P 11-58B
Req. 1
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
May
1
Accounts Receivable (€100,000 × $1.37) …
137,000
Sales Revenue………………………………….
137,000
10
Supplies ……………………………………………….
38,690
Accounts Payable (C$53,000 × $.73) ….
38,690
17
Accounts Receivable (₤132,000 × $1.95) …
257,400
Sales Revenue………………………………….
257,400
Accounts Receivable ………………………..
137,000
Foreign-Currency Transaction Gain …..
3,000
June
18
Accounts Payable …………………………………
38,690
Cash (C$53,000 × $.72) ……………………..
38,160
Foreign-Currency Transaction Gain …..
530
24
Cash (₤132,000 × $1.92) …………………………
253,440
Foreign-Currency Transaction Loss ……….
3,960
Accounts Receivable ………………………..
257,400
Income statement (partial):
Foreign-currency transaction (loss), net
$(430)
(continued) P 11-58B
Req. 2
This problem demonstrates that the final amount of a cash receipt or
cash payment on an international transaction may differ from the initial
(20-25 min.) P 11-59B
Req. 1
Earnings per share:
Income from continuing operations
[($220,000 − $25,300) / 131,000]……………………………
$1.49
Gain on discontinued operations ($67,000 / 131,000)…….
.51
Net income [($287,000 − $25,300) / 131,000]………………..
Req. 2
Investment Capitalization Rates
6%
8%
10%
Estimated value
of TSL
=
$1.49
$1.49
$1.49
common stock
.06
.08
.10
=
$24.83
$18.63
$14.90
(30-40 min.) P 11-60B
Req. 1
Northern Foods, Inc.
Income Statement
Year Ended June 30, 2016
Revenues:
Sales revenue ……………………………………………
$864,000
Expenses:
Cost of goods sold ……………………………………
$387,000
Selling expenses ……………………………………….
104,000
General expenses …………………………..…………
99,000
Income tax expense …………………………………..
Total expenses ……………………………………..
699,600
Income from continuing operations ……………….
164,400
Income from discontinued operations,
16,200
Earnings per share:
Income from continuing operations ($164,400 / 10,000*) …..
$16.44
income from discontinued operations ($16,200 / 10,000) ….
1.62
Net income ($180,600 / 10,000) ……………………………………….
$18.06
(continued) P 11-60B
Req. 2
Northern Foods, Inc.
Statement of Comprehensive Income
Year Ended June 30, 2016
Net income …………………………………………………..
$180,600
Other comprehensive income:
(7,800)
Comprehensive income ………………………………..
(25-35 min.) P 11-61B
Req. 1
Pretax accounting income of 2016 ………………………..
$200,000
+
Additional taxable income for income
earned in 2017 that is taxed in 2016 ………………….
Additional depreciation expense for
MACRS tax depreciation …………………………………..
Req. 2
Journal
DATE
ACCOUNT TITLES AND EXPLANATION
DEBIT
CREDIT
2016
Income Tax Expense ($200,000 × .30) ………….
60,000
Income Tax Payable ($184,000 × .30) ……..
Req. 3
Consolidated Publications, Inc.
Income Statement
For the Year Ended December 31, 2016
Total revenue ……………………………………………….
$900,000
Expenses:
Cost of goods sold …………………………………..
$480,000
Operating expenses …………………………………
220,000
Total expenses…………………………………………