Exam 4: Reporting Financial Performance

Statement of retained earnings Mondial Corporation prepares financial statements in accordance with ASPE. At January 1, 2020, the company had retained earnings of $420,000. In 2020, net income was $1,737,000, and cash dividends of $360,000 were declared and paid. Prepare a 2020 statement of retained earnings for Mondial Corporation.

Use the following information for the following questions: Sesame Corp.'s adjusted trial balance at December 31, 2020, included the following: Sales...................................................................... Cost of goods sold.................................................. Administrative expenses........................................ Loss on sale of equipment....................................... Sales commissions.................................................. Interest revenue..................................................... Loss of warehouse due to flood............................... Loss from operation of discontinued division......... Bad debt expense.................................................... Totals..................................................................... \ 70,000 28,000 11,000 9,000 15,000 24,000 \1 70,000 6,000 Sesame uses the perpetual system, and their income tax rate is $30 \%$ . -On Sesame's multiple-step income statement for 2020, net income is

The strict cash basis of accounting

The following information was extracted from the accounts of Tomato Corporation at December 31, 2020: \ Total reported income since incorporation................... \1 ,540,000 Total cash dividends paid ............................................ (550,000) Cumulative effect of changes in accounting principle............. (154,000) Total stock dividends distributed ......................................... (330,000) Correction of an error, recorded January 1, 2020 ............... 84,700 What should be the balance of retained earnings at December 31, 2020?

Regarding presentation of discontinued operations, under IFRS, on the balance sheet, an entity must classify held-for-sale assets as

Non-GAAP measures Companies often try to help users assess the results of operations and their financial position by providing modified GAAP information such as non-GAAP earnings. Describe what is meant by non-GAAP earnings, and explain the danger in providing these numbers.

Representational faithfulness Consider the concept of representational faithfulness. Explain why an understanding of the business and industry is essential to performing an audit, and how this relates to the fundamental characteristic of representational faithfulness.

When looking to the statement of financial position for an assessment of earnings quality, stakeholders should pay particular attention to

Segregating a company's recurring operating income from nonrecurring income sources is useful because

During 2020, Door Inc. decided to dispose of Bell Division, considered a separate reportable segment. Door estimates it can sell Bell at a loss of $30,000, which it does on May 1, 2020. Bell's operating income from January 1 to April 30 was $23,000. Ignoring taxes, and assuming statements are prepared under ASPE, the discontinued operations section of Door's income statement for the year ended December 31, 2020 should report

Regarding presentation of expenses by nature versus function, function refers to

When reporting a change in accounting principle, required disclosure(s) on the income statement include

Discontinued operations Motivated Inc.'s manufacturing division lost $140,000 (net of tax) for the year ended December 31, 2020. Motivated estimates that it can sell the division at a loss of $190,000 (net of tax). The division qualifies for treatment as a discontinued operation. Instructions a) Explain how the discontinued operation would be measured and presented on the income statement and balance sheet under ASPE. b) Explain how your answer to part (a) would be different if Motivated prepared financial statements in accordance with IFRS.

Use the following information for the following questions: Ignore taxes. Peach Inc.'s financial statements for the years 2019 and 2020 contained errors as follows: Ending inventory Depreciation Expense \ 3,000 understated 5,500 overstated \ 5,000 overstated 3,500 overstated -Assuming that none of the errors were detected or corrected, and that no additional errors were made in 2019, by what amount will current assets at December 31, 2020 be overstated or understated?

The view of income that IFRS generally supports is referred to as the

When a company disposes of a discontinued operation (segment), the transaction should be included in the income statement as a gain or loss on disposal, and reported as

Honeysuckle Inc. reported the following information for 2020: Sales revenue............................................................ \7 80,000 Cost of goods sold....................................................... 525,000 Operating expenses.................................................... 82,500 Gain on the sale of equipment.................................... 105,000 Cash dividends received on investment securities............ 4,500 For 2020, on a multiple-step income statement, Honeysuckle would report other income of

At year end, other comprehensive income is closed out to

The concept of soft numbers reflects the fact that

Use the following information for the following questions: The tax rate for all items is 30%. 1. Depreciation for 2019 was found to be understated by $30,000. 2. A 2020 strike by the employees of a supplier resulted in a loss of $20,000. 3. The inventory at December 31, 2018 was overstated by $40,000. 4. A 2020 flood destroyed a building that had a book value of $400,000. Floods are very uncommon in that area. -The effect of these events and transactions on 2020 income from continuing operations net of tax would be