BE4-1

Starr Co. in 2014

Sales Revenues
Cost of goods sold
Salaries and wages expense
Income tax expense
Increase in value of company reputati
Other operating expenses
Unrealized gain on value of patents

540,000.00
330,000.00
120,000.00
25,000.00
15,000.00
10,000.00
20,000.00

Answer to Question

Sales
Cost of goods sold
Gross profit
Selling expenses.
120,000.00
Administrative expens
10,000.00
Income before income tax
Income tax
Net income.
Earnings per share

BE4-3

540,000.00
330,000.00
210,000.00
130,000.00
80,000.00
25,000.00
55,000.00
0.55

relate to Be4-2

Revenues
Net sales

2,400,000.00

Interest revenue

31,000

Total revenues

2,431,000

Expenses

Cost of goods sold

Selling expenses
Administrative expenses
Interest expense
Income tax expense*
Total expenses
Net income

1,450,000.00
280,000
212,000
45,000
133,200
2,120,200
$310,800

Earnings per share**

$1,036,000.00

BE4-5
Stacy Corporation for 2014
Income before taxes
unusual and infrequent pretax loss
tax rate
Common stock Outstanding

6,300,000.00
770,000.00
0.3
5,000,000.00

Answer to Question

Income before income tax and extraordinary

item
6,300,000.00
Income tax expense
1,890,000
Income before extraordinary item
4,410,000
Extraordinary itemlos
770,000.00
Less: Applicable incom
231,000
539,000
Net income
$3,871,000
Earnings per share

Income before extraordinary item

Extraordinary loss, net of tax
Net income

0.88
-0.11
0.77

BE4-8
Hollis Corporation in 2014
Net income
Preferred stock dividend
Weighted average common shares oustanding

1,000,000.00
250,000.00
190,000.00

Answer to Question
Net income
Preferred stock dividend
Weighted average common shares ou
Per share

1,000,000.00
250,000.00
190,000.00
3.95

BE4-10

relate tp BE4-09

Land error discovered

80,000.00

Answer to Question

PORTMAN CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2010
Retained earnings, January 1, as report
Correction for overstatement of expenses in
prior period (net of tax)
Retained earnings, January 1, as adjust
Add: Net income
Less: Cash dividends
Retained earnings, December 31

675,000.00
80,000
755,000
1,400,000
2,155,000
75,000
$2,080,000

BE4-2
Oustanding Stock

100,000.00

Answer to Quest

BE4-4

BE4-6

Answer to Quest

BE4-9

Answer to Quest

BE4-11

Answer to Quest

Brisky Corporation
Net Sales
Interest Revenue
Cost of Goods Sold
Administrative Expenses
Selling Expense
Interest Expense
Tax bracket
common stock shares authorized
Shares issued oustanding

2,400,000.00
31,000.00
1,450,000.00
212,000.00
280,000.00
45,000.00
0.30
100,000.00
70,000.00

Answer to Question

Net sales......................................... 2,400,000.00

Cost of goods sold ............................ 1,450,000.00
Gross profit.....................................
950,000.00
Selling expenses ............
280,000.00
Administrative expenses...
212,000.00
492,000.00
458,000
458,000.00
Other income and expense
Interest revenue................................
31,000.00
Income from operations...................... 489,000.00
Interest expense ...............................
45,000.00
Income before income tax................... 444,000.00
Income tax ($444,000 X 30%)...............133,200.00
Net income ......................................
310,800.00
Earnings per share ............................
4.44

Finley Corporation During 2014

Income from Continuing Operation
Disposed after tax loss
Prior disposal on loss
Common stock oustanding

10,600,000.00
189,000.00
315,000.00
10,000,000.00

Answer to Question
Income from continuing operations
Discontinued operations
Loss from operation of discontinued
restaurant division (net of tax)
315,000.00
Loss from disposal of restaurant division
(net of tax)
189,000
Net income
Earnings per share
Income from continuing operations
Discontinued operations, net of tax
Net income

10,600,000.00

504,000
10,096,000.00
$1.06
-0.05
$1.01

Williamson Company during 2014

Pretax Income under FIFO (2012)
Pretax Income under FIFO (2013)
Weighted average pre-tax income (2012)
Weighted average pre-tax income (2013)
Reported pretax income
Tax Rate

160,000.00
180,000.00
145,000.00
170,000.00
180,000.00
0.3

Answer to Question

Income before income tax

Income tax (30%)
Net Income

2010
180,000.00
54,000
126,000.00

2009
145,000.00
43,500
101,500.00

2008
170,000.00
51,000
119,000.00

Portman Corporation Year earning

Retained Earnings
Net income in 2014
Cash dividends declared

675,000.00
1,400,000.00
75,000.00

Answer to Question

Retained earnings, January 1

Add: Net income
Less: Cash dividends
Retained earnings, December 31

675,000.00
1,400,000
2,075,000
75,000
$2,000,000

Richards Inc Jan. 2014

Common Stock
Purchased Equity Security
Received cash dividends
unrealized gain on securities

60,000.00
20,000.00
3,000.00
4,000.00

Answer to Question

(a) Net income (Dividend revenue)

3,000.00

(b) Net income

3,000.00

Unrealized holding gain

Comprehensive income

4,000
7,000.00

(c) Unrealized holding gain

(Other comprehensive income)

4,000.00

(d) Accumulated other comprehensive income,

January 1, 2010
$0
Unrealized holding gain
4,000
Accumulated other comprehensive income,
December 31, 2010
$4,000

E4-1
Cash
Accounts Receivable (net)
Inventory
Investments

79,000.00
45,000.00
127,000.00
(47,000.00)

Answer to Question
Computation of net income
Change in assets:
Change in liabilities:

79,000.00

45,000.00

82,000.00

(51,000.00)

Change in stockholders equity:

Change in stockholders equity accounted
for as follows:
Net increase
Increase in common stock
125,000.00
Increase in additional paid-in capita
13,000
Decrease in retained earnings due to
dividend declaration
-19,000
Net increase accounted for
Increase in retained earnings due to net
income

173,000.00

119,000.00
54,000.00

127,000.00

E4-3
Rent Revenue
Interest Expense
Beginning Retained earnings
ending retained earning
dividend revenue
sales return and allowances
allocation to noncontrolling interest

6,500.00
12,700.00
114,400.00
134,000.00
71,000.00
12,400.00
17,000.00

Paczki Products Co.

Answer to Question
(a)

Total net revenue:

Sales
Less: Sales discounts
Sales returns
Net sales
Dividend revenue
Rental revenue
Total net revenue

(b)

Net income:
Total net revenue (from a)
Expenses:
Cost of goods sold
Selling expenses
Administrative expenses
Interest expense
Total expenses
Income before income tax
Income tax
Net income

390,000.00
7,800.00
12,400

20,200
369,800
71,000
6,500
$447,300

$447,300
184,400.00
99,400
82,500
12,700
379,000
68,300
31,000
$37,300

E4-5
Elwes and Wright related to P. Bride Company
Administrative expense
Offi cers salaries
Depreciation of offi ce furniture and
Cost of goods sold
Rent revenue
Selling expense
Delivery expense
Sales commissions
Depreciation of sales equipment
Sales revenue
Income tax
Interest expense
Transportation-out

4,900.00
3,960.00
60,570.00
17,230.00
2,690.00
7,980.00
6,480.00
96,500.00
9,070.00
1860
-

Answer to Question
(a) Multiple-Step Form
WEBSTER COMPANY
Income Statement
For the Year Ended December 31, 2010
(In thousands, except earnings per share)

Sales
Cost of goods sold
Gross profit
Operating Expenses
Selling expenses
Sales commissions
Depr. of sales equipment
Transportation-out
Administrative expenses
Officers salaries
Depr. of office furn. and equip.
Income from operations

96,500.00
60,570
35,930

7,980.00
6,480
2,690
4,900
3,960

$17,150

8,860
9,920

Other Revenues and Gains

Rental revenue
Other Expenses and Losses
Interest expense
Income before income tax
Income tax
Net income

Earnings per share ($14,710 40,550)

17,230
27,150
1,860
25,290
9,070
$16,220

$0.40

Latifa Shoe Co.

E4-7
Rent revenue
Interest expense
Market appreciation on land above co
Salaries and wages expense (selling)
Supplies (selling)
Income tax
Salaries and wages expense (administ
Other administrative expenses
Cost of goods sold
Net sales
Depreciation on plant assets (70% sel
Cash dividends declared
Common stock shares

29,000.00
18,000.00
31,000.00
114,800.00
17,600.00
37,400.00
135,900.00
51,700.00
496,000.00
980,000.00
65,000.00
16,000.00
20,000.00

Answer to Question
(a) Multiple-Step Form
WEATHERSPOON SHOE CO.

Income Statement
For the Year Ended December 31, 2010
Net sales
Cost of goods sold
Gross profit
Operating Expenses
Selling expenses
Wages and salaries
Depr. exp. (70% X $65,000)
Materials and supplies

114,800.00
45,500
17,600

Administrative expenses
Wages and salaries

135,900

Other admin. expenses

51,700

Depr. exp. (30% X $65,000)

19,500

Income from operations

Other Revenues and Gains
Rental revenue
Other Expenses and Losses
Interest expense
Income before income tax
Income tax
Net income
Earnings per share

E4-9
Calderon Corp. for the year 2014.
Net sales

1,300,000.00

Cost of goods sold

Write-off of inventory due to obsolescence

780,000.00

Depreciation expense omitted by accident in 2013

Selling expenses

65,000.00

Casualty loss (extraordinary item) before taxes

Administrative expenses

48,000.00

Cash dividends declared

Dividend revenue

20,000.00

Retained earnings at December 31, 2013

Interest revenue

7,000.00

Oustanding shares

Effective tax rate of 34% on all items

60,000.00

(a) Calderon Corp. for the year 2014.

Income Statement
For the Year Ended December 31, 2010
Sales Revenue
Net sales
Cost of goods sold
Gross profit
Operating Expenses
Selling expenses
Administrative expenses
Income from operations
Other Revenues and Gains
Dividend revenue
Interest revenue

1,300,000.00
780,000
520,000

65,000.00
48,000

20,000
7,000

Other Expenses and Losses

Write-off of inventory due to
obsolescence
Income before income tax and extraordinary
item
Income tax
Income before extraordinary item
Extraordinary item
Casualty loss
Less: Applicable tax reduction
Net income
Per share of common stock:
Income before extraordinary item

113,000
407,000

27,000
434,000

80,000
354,000
120,360
233,640

50,000
17,000

33,000
$200,640

($167,640 60,000)
Extraordinary item, net of tax
Net income ($134,640 60,000)

3.89
-3.344
0.55

Accounts Payable
Bonds Payable
Common Stock
Paid-in Capital in excess of par- common stock
Dividend declaration paid

(47,000.00) =

204,000.00

=
31,000.00
173,000.00 increase

(51,000.00)
82,000.00
125,000.00
13,000.00
19,000.00

Sales Discounts
Selling Expenses
Sales Revenue
Income Tax expenses
Cost of Goods Sold
Administrative Expenses

7,800.00
99,400.00
390,000.00
31,000.00
184,400.00
82,500.00

Dividends declared:
Ending retained earnings
Beginning retained earnings
Net increase
Less: Net income (from (b))
Dividends declared

134,000.00
114,400
19,600
37,300
$17,700

Common stock share oustanding

40550

(b) Single-Step Form

WEBSTER COMPANY
Income Statement
For the Year Ended December 31, 2010
(In thousands, except earnings per share)
Revenues
Sales
Rental revenue
Total revenues

96,500.00
17,230
113,730

Expenses
Cost of goods sold
Selling expenses
Administrative expenses
Interest expense
Total expenses

60,570
17,150
8,860
1,860
88,440

Income before income tax

25,290

Income tax
Net income

9,070
$16,220

Earnings per share

Selling

0.7 Admin

$0.40

0.3

980,000.00
496,000
484,000

177,900.00

207,100
99,000

29,000
128,000
18,000
110,000
37,400
$72,600
$3.63

nventory due to obsolescence

expense omitted by accident in 2013

s (extraordinary item) before taxes

nings at December 31, 2013

rate of 34% on all items

80,000.00
55,000.00
50,000.00
45,000.00
980,000.00
0.34

(B) Calderon Corp. for the year 2014.

Retained Earnings Statement
For the Year Ended December 31, 2010
Retained earnings, Jan. 1, as reported
Correction for overstatement of net income in prior
period (depreciation error) (net of $13,600 ta
Retained earnings, Jan. 1, as adjusted
Add: Net income
Less: Dividends declared
Retained earnings, Dec. 31

E4-2

Viel Company at December

Sales revenue
Cost of goods sold
Selling and administrative expenses
Gain on sale of plant assets
Unrealized gain on available-for-sale investments
Interest expense
Loss on discontinued operations
Allocation to noncontrolling interest
Dividends declared and paid

Answer to Question
Sales revenue.
Cost of goods sold
Gross profit
Selling and administrative expenses
Other income and expense
Gain on sale of plant assets
Income from operations
Interest expense
Income from continuing operations
Loss on discontinued operations.
Net income
Allocation to non-controlling interest
Net income attributable to controlling shareholders
Net income
Unrealized gain on available-for-sale financial assets
Comprehensive income.
Net income
Dividends declared and paid
Retained earnings December 31, 2010

E4-4
LeRoi Jones Inc
Beginning inventory
inventory decrease
Sales Discounts
Common stock shares
Intereste Expense
tax rate
Cost of goods sold
Administrative expense (.2 of COG
Gross sales (.08 of COGS)
Operating expenses

Answer to Question
Revenues
Net sales ($admin expenses/.08)-17000
Expenses
Cost of goods sold
Selling expenses
Administrative expenses
Interest expense
Total expenses
Income before income tax
Income tax
Net income
Earnings per share (d)

E4-6
Maria Conchita Alonzo Corp
Interest revenue
Cash
Sales revenue
Accounts receivable
Prepaid insurance
Sales returns and allowances
Allowance for doubtful accounts
Sales discounts
Land
Equipment
Buildings
Cost of goods sold

Answer to Question

Sales Revenue
Sales
Less: Sales returns and allowance
Sales discounts
Net sales revenue
Cost of goods sold
Gross profit
Operating Expenses
Selling expenses
Admin. and general expenses
Income from operations

Other Revenues and Gains

Interest revenue
Other Expenses and Losses

Interest expense
Income before tax and extraordinary item
Income tax ($199,000 X .34)
Income before extraordinary item
Extraordinary itemloss from earthqu
Less: Applicable tax reduction ($120,0
Net income
Per share of common stock:
Income before extraordinary item

(Income before extraordinary item oustanding shares

Extraordinary item (net of tax)
Net income ($52,140 100,000)

E4-8
Cash
Administrative expenses
Selling expenses
Net sales
Cost of goods sold
Cash dividends declared (2014)
Cash dividends paid (2014)
Discontinued operations (loss before income taxes)
Depreciation expense, not recorded in 2013
Retained earnings, December 31, 2013
Tax rate
Oustanding shares

Net sales
Less: Cost of goods sold

Income before income tax

Income tax
Net income
(b)

Income from continuing operat

before income tax

Income tax

Income from continuing operat

Discontinued operations, less a

tax of $12,000
Net income

*$60,000 + $40,000

Earnings per share:

Income from continuing

($70,000 20,000)
Loss on discontinued o
Net Income ($42,000 2

980,000.00
income in prior
-36,300
943,700
200,640
1,144,340
45,000
$1,099,340

e expenses

able-for-sale investments

ng interest

310,000.00
140,000.00
50,000.00
30,000.00
10,000.00
6,000.00
12,000.00
40,000.00
5,000.00

310,000.00
140,000.00
expenses

ng interest
controlling shareholders

ble-for-sale financial assets

ber 31, 2010

170,000.00
50,000
120,000
30,000
$150,000
6,000.00
$144,000.00
(12,000.00)
$132,000.00
40,000.00
$92,000.00
$132,000.00
10,000.00
142,000
132,000
5,000
$127,000

c
92,000.00
0.20
17,000.00
20,000.00
20,000.00
0.30
500,000.00
0.20
0.08
0.8

s/.08)-17000

$1,233,000
500,000.00
400,000.00
100,000.00
20,000.00
1,020,000
213,000
63,900
$149,100
7.455

a Alonzo Corp
$ 86,000
51,000
1,380,000
150,000
20,000
150,000
7,000
45,000
100,000
200,000
140,000
621,000

Accumulated depreciationequipment $ 40,000

Accumulated depreciationbuildings 28,000
Notes receivable
155,000
Selling expenses
194,000
Accounts payable
170,000
Bonds payable
100,000
Administrative and general expenses 97,000
Accrued liabilities
32,000
Interest expense
60,000
Notes payable
100,000
Loss from earthquake damage
(extraordinary item)
150,000
500,000
Common stock
21,000
Retained earnings

o Question

$1,380,000
$150,000
45,000

195,000
1,185,000
621,000
564,000

194,000
97,000

291,000
273,000

86,000
359,000

60,000

ordinary item

299,000
101,660
197,340
150,000
51,000

ary item oustanding shares

99,000
$98,340

1.9734
-0.99
$0.98

50,000.00
100,000.00
80,000.00
540,000.00
210,000.00
20,000.00
15,000.00
40,000.00
30,000.00
90,000.00
0.30
10,000.00

Less: Cost of goods sold

Administrative expenses
Selling expenses

540,000.00
-210,000
-100,000
-80,000

Discontinued operations-loss
ncome before income tax

-40,000
110,000

ncome tax

33,000

Net income

$77,000

ncome from continuing operations

150,000.00

ncome tax

###

ncome from continuing operations

###

Discontinued operations, less applicable income

###

Net income

###

*$60,000 + $40,000

Earnings per share:

Income from continuing operations

70,000 20,000)
Loss on discontinued operations, net
Net Income ($42,000 20,000)

$10.50
-7.7
$2.80

0.34
Tax rate
outstanding shares

100000

P4-1
Retained earnings balance, January 1, 2014
Sales revenue
Cost of goods sold
Interest revenue
Selling and administrative expenses
Write-off of goodwill
Income taxes for 2014
Gain on the sale of investments (normal recurring)
Loss due to flood damageextraordinary item (net of tax)
Loss on the disposition of the wholesale division (net of tax)
Loss on operations of the wholesale division (net of tax)
Dividends declared on common stock
Dividends declared on preferred stock
Oustanding Shares

$980,000
25,000,000
16,000,000
70,000
4,700,000
820,000
1,244,000
110,000
390,000
440,000
90,000
250,000
80,000
500,000

Answer to problem Questions

DICKINSON COMPANY
Income Statement
For the Year Ended December 31, 2010
Sales
Cost of goods sold
Gross profit
Selling and administrative expenses
Income from operations
Other revenues and gains
Interest revenue
$70,000
Gain on the sale of investments
110,000
Other expenses and losses
Write-off of goodwill
Income from continuing operations before income tax
Income tax
Income from continuing operations
Discontinued operations
Loss on operations, net of tax
90,000
Loss on disposal, net of tax
440,000
Income before extraordinary item
Extraordinary itemloss from flood
damage, net of tax

$25,000,000
16,000,000
9,000,000
4,700,000
4,300,000

180,000
820,000
3,660,000
1,244,000
2,416,000

530,000
1,886,000
390,000

Net income

$1,496,000

Earnings per share:

Income from continuing operations

4.672

Discontinued operations
Loss on operations, net of tax
Loss on disposal, net of tax
Income before extraordinary item
Extraordinary loss, net of tax
Net income

($0.18)
-0.88

Retained earnings, January 1

Add: Net income
Less: Dividends
Preferred stock
Common stock
Retained earnings, December 31

($1.06)
3.612
-0.78
2.832

$980,000
1,496,000
2,476,000
$80,000
250,000

330,000
$2,146,000