Exercise 4–21 (concluded)
TIGER ENTERPRISES
Statement of Cash Flows
For the Year Ended December 31, 2016
($ in thousands)
Cash flows from operating activities:
Collections from customers $ 7,080
Prepayment of insurance (130)
4–42 Intermediate Accounting, 8/e
Exercise 4–22
Requirement 1
Requirement 2
The specific citation that describes the additional information for earnings per
Requirement 3
For each period for which an income statement is presented, an entity discloses
all of the following:
a. A reconciliation of the numerators and the denominators of the basic and diluted
Exercise 4–22 (concluded)
For the latest period for which an income statement is presented, an entity must
provide a description of any transaction that occurs after the end of the most recent
Exercise 4–23
1. The calculation of the weighted average number of shares for basic
earnings per share purposes:
FASB ASC 260–10–55–2: “Earnings per Share–Overall–Implementation
Exercise 4–23 (continued)
2. The alternative formats permissible for reporting comprehensive income:
FASB ASC 220–10–45–1: “Comprehensive Income–Overall–Other
Presentation Items–Reporting Comprehensive Income.”
1A. An entity reporting comprehensive income in a single continuous financial
statement shall present its components in two sections, net income and other
comprehensive income. If applicable, an entity shall present the following in
that financial statement:
4–46 Intermediate Accounting, 8/e
3. The classifications of cash flows required in the statement of cash flows:
FASB ASC 230–10–45–1: “Statement of Cash Flows–Overall–Other
Presentation Matters–Form and Content.”
Exercise 4–24
List A List B
f 1. Intraperiod tax allocation a. An other comprehensive income item.
4–48 Intermediate Accounting, 8/e
Exercise 4–25
Quarter
First Second Third
Cumulative income before taxes $50,000 $90,000 $190,000
Exercise 4–26
Exercise 4–27
Quarters Ending
March 31 June 30 Sept. 30 Dec. 31
Advertising $200,000 $200,000 $200,000 $200,000
Exercise 4–28
Quarters Ending
March 31 June 30 Sept. 30 Dec. 31
Advertising $800,000 $ – 0 – $ – 0 – $ – 0 –
4–50 Intermediate Accounting, 8/e
CPA / CMA REVIEW QUESTIONS
CPA Exam Questions
2. d. Other than sales, COGS, and administrative expenses, only the gain or loss
3. a. In a single-step income statement, revenues include sales as well as other
revenues and gains.
Sales revenue $187,000
4. a. The $400,000 impairment loss and the $1,000,000 loss from operations
should be combined for a total loss of $1,400,000.
CMA Exam Questions
2. c. The operating section of a retailer’s income statement includes all
revenues and costs necessary for the operation of the retail establishment, for
4–52 Intermediate Accounting, 8/e
Problem 4–1
REED COMPANY
Comparative Income Statements
For the Years Ended December 31
2016
Sales revenue ……………………………………………….. [1]
$4,000,000
Cost of goods sold ………………………………………… [2]
2,570,000
Gross profit …………………………………………………..
1,430,000
Operating expenses:
Administrative ……………………………………………. [3]
750,000
Selling ………………………………………………………. [4]
340,000
Loss from fire damage ………………………………….
Loss from write-down of obsolete inventory ……
Total operating expenses …………………………..
1,175,000
Operating income ………………………………………….
255,000
Other income (expense):
Interest revenue ……………………………………………
150,000
Interest expense ……………………………………………
(200,000)
Total other expenses (net) …………………………
(50,000)
Income tax expense ……………………………………….
82,000
Income from continuing operations …………………..
123,000
Discontinued operations:
Income tax benefit (expense) …………………………..
Income (loss) on discontinued operations ………… [5]
Net income ……………………………………………………
117,000
Income from continuing operations before
PROBLEMS
Problem 4–1 (concluded)
[1] $4,400,000 – 400,000
4–54 Intermediate Accounting, 8/e
Problem 4–2
Requirement 1
JACKSON HOLDING COMPANY
Comparative Income Statements (in part)
For the Years Ended December 31
2016
2015
Income from continuing operations before
income taxes [1] ……………………………………
$3,000,000
$1,300,000
Income tax expense …………………………………..
1,200,000
520,000
Income from continuing operations …………….
1,800,000
780,000
Discontinued operations:
Income tax benefit (expense) …………………….
Income (loss) on discontinued operations …….
120,000
Net Income ………………………………………………
$ 600,000
[1] Income from continuing operations before income taxes:
2016 2015
Unadjusted $2,600,000 $1,000,000
[2] Income from discontinued operations:
2016 2015
Loss from operations $(400,000) $(300,000)
Problem 4–2 (concluded)
Requirement 2
The 2016 income from discontinued operations would include only the loss from
Requirement 3
The 2016 income from discontinued operations would include the loss from
4–56 Intermediate Accounting, 8/e
Problem 4–3
MICRON CORPORATION
Partial Income Statement
For the Year Ended December 31, 2016
Income from continuing operations before
income taxes ……………………………………..
Income tax expense ………………………………
Discontinued operations:
Loss on discontinued operations …………….
Net income ………………………………………….
[1] Income from continuing operations before taxes:
Unadjusted $1,200,000
[2] Loss on discontinued operations:
Income from operations $ 160,000
Deduct: Loss on sale of assets (300,000)
Problem 4–4
1. Restructuring is an example of an event that is material and unusual. Restructuring
costs should be included in income from continuing operations but reported on a
2. The income from the discontinued operation should be presented, net of tax, in the
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
4–58 Intermediate Accounting, 8/e
Problem 4–5
ALEXIAN SYSTEMS, INC.
Income Statement
For the Year Ended December 31, 2016
($ in millions except per share data)
Net sales revenue …………………………………………………….
$425
Cost of goods sold …………………………………………………..
Gross profit …………………………………………………………….
Operating expenses:
Selling and administrative ……………………………………..
[2] $128
Restructuring costs ……………………………………………….
26
Total operating expenses …………………………………….
Operating income ……………………………………………………
Other income:
Interest revenue ……………………………………………………
3
Gain on sale of investments ……………………………………
6
Total other income ……………………………………………..
9
Income tax expense …………………………………………………
[3] 6
$ 81
$ 4.05
Problem 4–6
REMBRANDT PAINT COMPANY
Income Statement
For the Year Ended December 31, 2016
($ in thousands, except per share amounts)
Sales revenue ………………………………………………
$18,000
Cost of goods sold ……………………………………….
10,500
Gross profit …………………………………………………
7,500
Operating expenses:
Operating income ………………………………………..
4,200
Interest income (expense), net ……………………….
Income from continuing operations ………………..
Discontinued operations:
120
Income on discontinued operations ………………..
Net income ………………………………………………….
Earnings per share:
Income from continuing operations ………………..
Income on discontinued operations ………………..
Net income ………………………………………………….
4–60 Intermediate Accounting, 8/e
Problem 4–7
Requirement 1
SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2016
($ in 000s)
Sales revenue …………………………………………………………
$15,300
Cost of goods sold …………………………………………………..
6,200
Gross profit ……………………………………………………………
Operating expenses:
Selling ………………………………………………………………..
General and administrative ……………………………………
Restructuring costs …………………………..…………………..
Total operating expenses …………………………………..
Operating income ……………………………………………………
5,800
Other income (expense):
Loss on sales of investments …………………………………………………..
$(220)
Interest expense ……………………………………………………….
(180)
Interest revenue ……………………………………………………….
Other income (expense) ………………………………………………………
Income from continuing operations before income taxes
Income tax expense …………………………………………………
2,194
Income from continuing operations ………………………….
Discontinued operations:
Income from operations of discontinued component
Income tax expense ………………………………………………
(336)
Income on discontinued operations …………………………..
Net income …………………………………………………………….
Other comprehensive income:
Unrealized gains from investments, net of tax …………
Loss from foreign currency translation, net of tax …..
(144)
Total other comprehensive income ………………………….
Comprehensive income ………………………………………….
$3,843