Exam 4: Income Statement

Equity earnings (losses)are the proportionate share of the earnings (losses)of the investee.

The following relate to Data Original in 2012.What is the ending inventory? Purchases \5 40,000 Beginning Inventory 80,000 Purchase Returns 10,000 Sales 800,000 Cost of Goods Sold 490,000

The income statement of Jones Company for the year ended December 31,2012,shows: Sales \1 ,800,000 Cost of good sold Gross profit \6 00,000 Operating expenses (200,000) Equity earnings of nonconsolidated subsidiaries Operating income before income taxes \4 30,000 Taxes related to operations Net income from operations before cumulative effect of change in accounting principle \3 00,000 Cumulative effect of change in accounting principle (less applicable income taxes of \ 30,000) Net income Required: a.Compute the net earnings after removing nonrecurring items. b.Determine the earnings from the nonconsolidated subsidiary. c.Determine the total tax amount.

An income statement is a summary of revenues and expenses and gains and losses,ending with net income for a particular period of time.

Which of the following will not affect retained earnings?

A stock split merely increases the number of shares of stock;it usually does not change retained earnings or paid-in capital.

Accountants have not accepted the role of disclosing the firm's capacity to make distributions to stockholders.

Since the number of shares changes under both a stock dividend and a stock split,any ratio based on the number of shares must be restated.

Forta Company presents you with the following account balances taken from the December 31,2012,trial balance.Required: Prepare a single-step income statement in proper form. Sales \2 00,000 Cost of Goods Sold 80,000 Cash 10,000 Selling Expenses 20,000 General and Administrative Expenses 15,000 Interest Income 3,000 Interest Expense 2,000 Accounts Receivable 15,000 Retained Earnings 60,000 Gain on Sale of Property 2,000 Accounts Payable 15,000 Additional data: 1. 10,000 shares of cammon stock were outstanding the entire year. 2. The income tax rate is $35 \%$

Extraordinary items are always presented gross of applicable income taxes.

Retained earnings,an account on the balance sheet,represents the undistributed earnings of the corporation.

Fisher Company has 1,000,000 share of common stock with a par value of $10.Additional paid-in capital totals $10,000,000 and retained earnings is $12,000,000.The directors declare a 6% stock dividend when the market value is $5.The reduction of retained earnings as a result of the declaration will be:

Anchor Company has 1,000,000 shares of common stock with a par value of $5.Additional paid-in capital totals $5,000,000 and retained earnings is $8,000,000.The directors declare a 10% stock dividend when the market value is $15.The reduction of retained earnings as a result of the declaration will be:

Under IFRS,equipment may be revalved.

Information related to Batavia Furniture Company for the year ended December 31,2012,follows. Cost of Goods Sold \7 0,000 Dividends Declared 5,000 Flood Loss (pre-tax) 12,000 General Expense 8,000 Other Income 9,000 Other Expense 11,000 Retained Earnings, January 1, 2010 116,000 Sales 131,000 Selling Expense 7,000 Required: Prepare in good form a multiple-step income statement for the year 2012.Assume a 50% tax rate and that 5,000 shares of common stock were outstanding during the year.