LIBERTY ACCT 301 CHAPTER 4 Summer B 2015

| June 3, 2016

Question
LIBERTY ACCT 301 SPRING 2015

(ACCT 301 – Summer B 2015 3)

Assignment:

Chapter 4

1.

Award: 1 out of 1.00 point

The following is a partial year-end adjusted trial balance.

Account Title

Debits

Credits

Sales revenue

450,000

Loss on sale of investments

52,000

Interest revenue

6,000

Loss from flood damage (unusual and infrequent)

57,500

Cost of goods sold

235,000

General and administrative expenses

55,000

Restructuring costs

65,000

Selling expenses

32,500

Income tax expense

0

Income tax expense has not yet been accrued. The income tax rate is 40%.

a.

Determine the operating income (loss).

b.

Determine the income (loss) before any separately reported items.

c.

Determine the net income (loss).

2.

Award: 1.80 out of 2.00 points

The following are partial income statement account balances taken from the December 31, 2013, year-end trial balance of White and Sons, Inc.: restructuring costs, $400,000; interest revenue, $50,000; loss from earthquake (unusual and infrequent), $500,000; and loss on sale of investments, $60,000. Income tax expense has not yet been accrued. The income tax rate is 40%.

Prepare the lower portion of the 2013 income statement beginning with $900,000 income before income taxes and extraordinary item. Include appropriate basic EPS disclosures. The company had 100,000 shares of common stock outstanding throughout the year.(Amounts to be deducted should be indicated with a minus sign.Round your “EPS” answers to 2 decimal places.)

3.

On December 31, 2013, the end of the fiscal year, California Microtech Corporation completed the sale of its semiconductor business for $11 million. The business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $8 million. The loss from operations of the segment during 2013 was $4.6 million. Pretax income from continuing operations for the year totaled $7.6 million. The income tax rate is 30%.

Prepare the lower portion of the 2013 income statement beginning with pretax income from continuing operations. Ignore EPS disclosures.(Amounts to be deducted and negative amounts should be indicated with a minus sign. Enter your answers in whole dollars.)

4.

The following is a partial trial balance for General Lighting Corporation as of December 31, 2013:

Account Title

Debits

Credits

Sales revenue

2,800,000

Rental revenue

89,000

Loss on sale of investments

27,000

Loss from flood damage (event is both unusual and infrequent)

210,000

Cost of goods sold

1,280,000

Loss from write-down of inventory due to obsolescence

290,000

Selling expenses

390,000

General and administrative expenses

195,000

Interest expense

88,000

200,000 shares of common stock were outstanding throughout 2013. Income tax expense has not yet been accrued. The income tax rate is 40%.

Required:

1.

Prepare a single-step income statement for 2013, including EPS disclosures.(Round EPS answers to 2 decimal places.)

2.

Prepare a multiple-step income statement for 2013, including EPS disclosures.(Round EPS answers to 2 decimal places.)

5.

Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2013, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2013, at a price of $600,000. The book value of the division’s assets was $1,000,000, resulting in a before-tax loss of $400,000 on the sale.

The division incurred a before-tax operating loss from operations of $130,000 from the beginning of the year through December 15. The income tax rate is 40%. Chance’s after-tax income from its continuing operations is $350,000.

Required:

Prepare an income statement for 2013 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year.(Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)

6.

Kandon Enterprises, Inc., has two operating divisions; one manufactures machinery and the other breeds and sells horses. Both divisions are considered separate components as defined by generally accepted accounting principles. The horse division has been unprofitable, and on November 15, 2013, Kandon adopted a formal plan to sell the division. The sale was completed on April 30, 2014. At December 31, 2013, the component was considered held for sale.

On December 31, 2013, the company’s fiscal year-end, the book value of the assets of the horse division was $250,000. On that date, the fair value of the assets, less costs to sell, was $200,000. The before-tax loss from operations of the division for the year was $140,000. The company’s effective tax rate is 40%. The after-tax income from continuing operations for 2013 was $400,000.

Required:

1.

Prepare a partial income statement for 2013 beginning with income from continuing operations. Ignore EPS disclosures.(Amounts to be deducted should be indicated with a minus sign.)

2.

Prepare a partial income statement for 2013 beginning with income from continuing operations. Assuming that the estimated net fair value of the horse division’s assets was $400,000, instead of $200,000.(Amounts to be deducted should be indicated with a minus sign.)

7.

Selected information about income statement accounts for the Reed Company is presented below (the company’s fiscal year ends on December 31):

2013

2012

Sales

$

4,700,000

$

3,800,000

Cost of goods sold

2,920,000

2,060,000

Administrative expenses

860,000

735,000

Selling expenses

420,000

372,000

Interest revenue

156,000

146,000

Interest expense

212,000

212,000

Loss on sale of assets of discontinued component

74,000

On July 1, 2013, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2013, for $74,000 less than their book value. Results of operations for the component (includedin the above account balances) were as follows:

1/1/13-9/30/13

2012

Sales

$

460,000

$

560,000

Cost of goods sold

(320,000

)

(356,000

)

Administrative expenses

(56,000

)

(46,000

)

Selling expenses

(26,000

)

(36,000

)

Operating income before taxes

$

58,000

$

122,000

In addition to the account balances above, several events occurred during 2013 that havenotyet been reflected in the above accounts:

1.

A fire caused $56,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.

2.

An earthquake caused $106,000 in property damage to one of Reed’s factories. The amount of the loss is material and the event is considered unusual and infrequent.

3.

Inventory that had cost $46,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $6,000.

4.

Income taxes have not yet been accrued.

Required:

Prepare a multiple-step income statement for the Reed Company for 2013, showing 2012 information in comparative format, including income taxes computed at 20% and EPS disclosures assuming 500,000 shares of common stock.(Amounts to be deducted should be indicated with a minus sign.Round EPS answers to 2 decimal places.)

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