5-21
E5-4
1. Income statement; in the Other Items section
2. Income statement; as part of General and Administrative Expenses
6. Income statement; in the Other Items section
7. Income statement; in the Other Items section
11. Income statement; as a deduction to determine income from continuing
operations
12. Statement of retained earnings; as a deduction from retained earnings
5-22
E5-5
1. GOLD COMPANY
Income Statement
For Year Ended December 31, 2010
Sales $200,000
Less: Sales returns and allowances (5,000)
Net sales $195,000
Earnings per Common Share
Components of Income (7,000 common shares)
Income before extraordinary items $4.10
5-23
E5-5 (continued)
2. GOLD COMPANY
Income Statement
For Year Ended December 31, 2010
Revenues
Sales (net of $5,000 returns and allowances) $195,000
Interest revenue 4,000
Earnings per Common Share
Components of Income (7,000 common shares)
3. If Gold Company used IFRS, its income statement presentation and content
might differ as follows:
(a) It could choose to use either the single-step or multiple-step format;
5-24
E5-6
1. ADANDT COMPANY
Income Statement
For Year Ended December 31, 2010
Sales $163,000
Less: Sales returns and allowances (3,000)
Net sales $160,000
Cost of goods sold (95,000)
Earnings per Common Share
Components of Income (7,000 common shares)
Income before extraordinary items $3.45
5-25
E5-6 (continued)
2. ADANDT COMPANY
Income Statement
For Year Ended December 31, 2010
Revenues
Sales (net of $3,000 returns and allowances) $160,000
Interest revenue 2,500
Earnings per Common Share
Components of Income (7,000 common shares)
Income before extraordinary items $3.45
3. ADANDT COMPANY
Statement of Comprehensive Income
For Year Ended December 31, 2010
Net income $18,550
5-26
E5-7
1. FANTA COMPANY
Schedule 1: Cost of Goods Sold
For Year Ended December 31, 2010
Inventory, 1/1/2010 $ 43,000
Purchases $100,000
2. FANTA COMPANY
Income Statement
For Year Ended December 31, 2010
Sales $250,000
Less: Sales discounts taken (2,000)
Earnings per Common Share
Components of Income (25,000 common shares)
Income before extraordinary items $2.02
5-27
E5-7 (continued)
3. FANTA COMPANY
Income Statement
For Year Ended December 31, 2010
Revenues
Sales (net of $2,000 discounts) $248,000
Earnings per Common Share
Components of Income (25,000 common shares)
Income before extraordinary items $2.02
5-28
E5-8
1. ENGLE COMPANY
Schedule 1: Cost of Goods Sold
For Year Ended December 31, 2010
Inventory, 1/1/2010 $12,100
Purchases $89,700
2. ENGLE COMPANY
Income Statement
For Year Ended December 31, 2010
Revenues
Sales (net of $8,100 returns) $139,000
5-29
E5-8 (continued)
3. ENGLE COMPANY
Income Statement
For Year Ended December 31, 2010
Sales revenue $147,100
Less: Sales returns (8,100)
Earnings per Common Share
Components of Income (4,200 common shares)
4. ENGLE COMPANY
Statement of Comprehensive Income
For Year Ended December 31, 2010
Net income $12,040
5-30
E5-9
1. SENGER COMPANY
Income Statement
For Year Ended December 31, 2010
Sales (net) $124,000
Cost of goods sold (66,200)
Gross profit $ 57,800
Earnings per Common Share
Components of Income (4,400 common shares*)
Income from continuing operations $4.77
5-31
E5-9 (continued)
2. SENGER COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2010
Retained earnings, 1/1/2010 $45,800
E5-10
1. COBLER COMPANY
Schedule 1: Cost of Goods Sold
For Year Ended December 31, 2010
Merchandise inventory, 1/1/2010 $ 24,000
5-32
E5-10 (continued)
2. COBLER COMPANY
Income Statement
For Year Ended December 31, 2010
Revenues
Sales (net) $139,600
Dividend revenue 1,000
Earnings per Common Share
Components of Income (3,000 common shares#)
Income from continuing operations $5.20
E5-10 (continued)
3. COBLER COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2010
Retained earnings, 1/1/2010 $68,700
E5-11
Note to Instructor: The solution is shown in an income statement format. The
answers are lettered (a) through (f) below.
CALEB COMPANY
Income Statement
For Year Ended December 31
2010 2011
Sales (net) $96,000 $99,500 (e)
5-34
E5-12
Note to Instructor: The solution is shown in an income statement format. The
answers are labeled (a) through (g) below.
CONNOR COMPANY
Income Statement
For Year Ended December 31
2010 2011
Revenues:
Sales $210,000 $229,000 (e)
Less: Sales returns and allowances (4,000) (9,000)
Gross profit $ 92,000 (b) $100,000
Operating expenses:
E5-13
Results from discontinued operations
Loss from operations of discontinued
Division F (net of $90,000 income tax credit) $(210,000)a
E5-14
Results from discontinued operations
Loss from operations of discontinued
Net book value (310,000)
Pretax loss $(120,000)
Income tax credit [($120,000) x 0.30] 36,000
After tax loss $ (84,000)
5-36
E5-15 (AICPA adapted solution)
The change in inventory method from the average cost method to the first-in,
first out method is a change in accounting principle and should not be
The loss from operations of the discontinued Dex Division from January 1,
2011, to September 30, 2011 (the portion of the year prior to the date of sale)
David Company’s statements of income should be corrected as follows:
(a) “Other, net” and “total costs and expenses” should be decreased to
exclude the loss from operations of the discontinued Dex Division.
(f) A new subcaption, “loss from operations of the discontinued Dex Division,
less the amount of applicable income taxes,” should be added under the
caption “results from discontinued operations.”
5-37
E5-15 (continued)
(h) “Earnings per share of common stock” should be presented on the face of
(i) The cumulative effect on prior years of change in inventory method, less
E5-16
1. TNT COMPANY
Statement of Income and Comprehensive Income
For Year Ended December 31, 2010
Sales (net) $85,000
2.(a) TNT COMPANY
Income Statement
For Year Ended December 31, 2010
Sales (net) $85,000
Cost of goods sold (47,000)
5-38
E5-16 (continued)
2.(b) TNT COMPANY
Statement of Comprehensive Income
For Year Ended December 31, 2010
Net income $14,000
E5-17
TYRONE COMPANY
Partial Statement of Cash Flows
For Year Ended December 31, 2010
Net Cash Flow From Operating Activities
Net income $22,900
E5-18
LEXIE COMPANY
Partial Statement of Cash Flows
For Year Ended December 31, 2010
Cash Flows From Operating Activities
Cash Inflows:
E5-19
ROCKY COMPANY
Statement of Cash Flows
For Year Ended December 31, 2010
Net Cash Flow From Operating Activities
Net income $ 41,000
Cash Flows From Investing Activities
Payment for purchase of building $ (40,000)
Payment for purchase of equipment (8,000)
Net cash used for investing activities (48,000)
Cash Flows From Financing Activities
5-40
E5-20
JONES COMPANY
Statement of Cash Flows
For Year Ended December 31, 2010
Net Cash Flow From Operating Activities
Net income $ 60,400
Adjustments for differences between
Cash Flows From Investing Activities
Payment for purchase of equipment $ (41,500)