Partial Income Statement - DOC by iki66777

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									Exercise 4-3
Requirement 1


                         GENERAL LIGHTING CORPORATION
                                     Income Statement
                           For the Year Ended December 31, 2006

   Revenues and gains:
    Sales .................................................................                  $2,350,000
    Rental revenue ..................................................                            80,000
      Total revenues and gains ..............................                                 2,430,000

   Expenses and losses:
     Cost of goods sold ............................................            $1,200,300
     Salaries .............................................................        300,000
     Depreciation ......................................................           100,000
     Interest ...............................................................       90,000
     Rent ..................................................................        50,000
     Loss on sale of equipment ................................                     22,500
     Loss from inventory write-down .....................                          200,000
     Income tax expense * ........................................                 186,880
       Total expenses and losses .............................                               2,149,680
   Income before extraordinary item ......................                                     280,320
   Extraordinary item:
   Loss from flood damage (net of $48,000 tax benefit)                                         (72,000)
   Net income ..........................................................                     $ 208,320

   Earnings per share:
   Income before extraordinary item ......................                                     $ .93
   Extraordinary loss ...............................................                           (.24)
   Net income ..........................................................                       $ .69


     * 40% x $467,200
Exercise 4-3 (concluded)
Requirement 2

                          GENERAL LIGHTING CORPORATION
                                      Income Statement
                            For the Year Ended December 31, 2006
    Sales revenue ......................................................                   $2,350,000
    Cost of goods sold ..............................................                       1,200,300
    Gross profit .........................................................                  1,149,700
    Operating expenses:
     Salaries .............................................................    $300,000
     Depreciation .....................................................         100,000
     Rent ..................................................................     50,000
     Loss from inventory write-down .....................                       200,000
       Total operating expenses ..............................                               650,000
    Operating income ...............................................                         499,700
    Other income (expense):
      Rental revenue ..................................................          80,000
      Loss on sale of equipment ................................                (22,500)
      Interest expense ................................................         (90,000)
        Total other income (expense), net ................                                   (32,500)
    Income before taxes and extraordinary item ......                                         467,200
    Income tax expense * ..........................................                           186,880
    Income before extraordinary item ......................                                   280,320
    Extraordinary item:
    Loss from flood damage (net of $48,000 tax benefit)                                       (72,000)
    Net income ..........................................................                   $ 208,320

    Earnings per share:
    Income before extraordinary item ......................                                  $ .93
    Extraordinary loss ...............................................                        (.24)
    Net income ..........................................................                    $ .69


      * 40% x $467,200
Exercise 4-6

                                     CHANCE COMPANY
                                    Partial Income Statement
                             For the Year Ended December 31, 2006

   Income from continuing operations ....................................                   $ 350,000
   Discontinued operations:
     Loss from operations of discontinued component
      (including loss on disposal of $400,000)* ................................             (530,000)
     Income tax benefit ............................................................          212,000
     Loss on discontinued operations ......................................                  (318,000)
   Net income ...........................................................................   $ 32,000

   Earnings per share:
   Income from continuing operations ....................................                      $ 3.50
   Loss from discontinued operations .....................................                      (3.18)
   Net income ..........................................................................       $ .32


   * Loss on discontinued operations:

   Loss on sale of assets                               $(400,000)
   Operating loss                                        (130,000)
     Total before-tax loss                               (530,000)
   Less: Income tax benefit (40%)                         212,000
     Net-of-tax loss                                    $(318,000)
Exercise 4-8
Requirement 1

                               KANDON ENTERPRISES, INC.
                                    Partial Income Statement
                             For the Year Ended December 31, 2006
   Income from continuing operations ....................................                    $ 400,000
   Discontinued operations:
    Loss from operations of discontinued component
      (including impairment loss of $50,000) * ..............................                 (190,000)
    Income tax benefit .............................................................            76,000
    Loss on discontinued operations ......................................                    (114,000)
   Net income ..........................................................................     $ 286,000

   * Loss on discontinued operations:
   Operating loss                                                                          $(140,000)
   Impairment loss ($250,000 - 200,000)                                                      (50,000)
     Net before-tax loss                                                                    (190,000)
   Income tax benefit (40%)                                                                   76,000
     Net after-tax loss on discontinued operations                                         $(114,000)
Requirement 2

                               KANDON ENTERPRISES, INC.
                                    Partial Income Statement
                             For the Year Ended December 31, 2006
   Income from continuing operations ....................................                   $ 400,000
   Discontinued operations:
    Loss from operations of discontinued component * .........                               (140,000)
    Income tax benefit ............................................................            56,000
    Loss on discontinued operations ......................................                    (84,000)
   Net income ..........................................................................    $ 316,000
Problem 4-1
                                          DUKE COMPANY
                            Statement of Income and Comprehensive Income
                                 For the Year Ended December 31, 2006
  Sales revenue ..................................................................                  $15,000,000
  Cost of goods sold ...........................................................                      9,000,000
  Gross profit .....................................................................                  6,000,000
  Operating expenses:
   General and administrative ..........................................               $1,000,000
   Selling .........................................................................      500,000
   Restructuring costs .......................................................            300,000
   Loss from write-down of obsolete inventory                                             400,000
     Total operating expenses ...........................................                             2,200,000
  Operating income ............................................................                       3,800,000
  Other income (expense):
    Interest expense ............................................................                      (700,000)
  Income before income taxes and extraordinary item ......                                            3,100,000
  Income tax expense .........................................................                        1,240,000
  Income before extraordinary item ...................................                                1,860,000
  Extraordinary item:
  Loss from expropriation of overseas plant (net
    of $1,200,000 tax benefit) ............................................                          (1,800,000)
  Net Income .......................................................................                     60,000
  Other comprehensive income (loss):
   Foreign currency translation adjustment loss, net of tax                            (120,000)
   Unrealized gains on investment securities, net of tax                                108,000
  Total other comprehensive loss                                                                        (12,000)
  Comprehensive income                                                                                $ 48,000

 Notes:
 1. The restructuring costs and the loss from write-down of inventory are not
    extraordinary items.
 2. The depreciation expense error is a prior period adjustment and is not reported in
    the income statement.
Problem 4-2
                                                REED COMPANY
                                          Comparative Income Statements
                                         For the Years Ended December 31
                                                                                     2006                   2005
  Sales revenue ........................................................ [1]     $4,000,000         [6]   $3,000,000
  Cost of goods sold ................................................ [2]         2,570,000         [7]    1,680,000
  Gross profit ...........................................................        1,430,000                1,320,000
  Operating expenses:
  Administrative .................................................... [3]           750,000         [8]     635,000
  Selling ................................................................ [4]      340,000         [9]     282,000
  Loss from fire damage ........................................                     50,000                      --
  Loss from write-down of obsolete inventory ......                                  35,000                      --
     Total operating expenses ................................                    1,175,000                 917,000
  Operating income .................................................                255,000                 403,000
  Other income (expense):
   Interest revenue ...................................................               150,000               140,000
   Interest expense ...................................................              (200,000)             (200,000)
       Total other expenses (net) ..............................                      (50,000)              (60,000)
  Income from continuing operations before
       income taxes and extraordinary item ...............                            205,000               343,000
  Income tax expense ..............................................                    82,000               137,200
  Income from continuing operations before
     extraordinary item .............................................                 123,000               205,800
  Discontinued operations:
    Income (loss) from operations of discontinued
      component (including loss on disposal of
      $50,000 in 2006) ................................................               (10,000)              110,000
    Income tax benefit (expense) ................................                       4,000               (44,000)
    Income (loss) on discontinued operations ......... [5]                             (6,000)               66,000
  Income before extraordinary item ........................                           117,000               271,800
  Extraordinary item:
  Loss from early extinguishment of debt (net
        of $40,000 tax benefit) ..................................                       (60,000)                --
  Net income ............................................................        $        57,000          $ 271,800
  Earnings per share:
  Income from continuing operations before
    extraordinary item .............................................                 $  .41                 $ .69
   Discontinued operations ......................................                      (.02)                  .22
   Extraordinary item ..............................................                    (.20)                  --
  Net income ............................................................            $ .19                  $ .91
Problem 4-2 (concluded)
    [1] $4,400,000 - 400,000

    [2]   $2,860,000 - 290,000

    [3]   $800,000 - 50,000

    [4]   $360,000 - 20,000

    [5] Loss in 2006:
        Operating income                                      $ 40,000
        Loss on sale of assets                                 (50,000)
        Loss before tax benefit                                (10,000)
        Tax benefit (40% x $10,000)                              4,000
        Loss on discontinued operations, net of tax benefit   $ (6,000)

    [6]   $3,500,000 - 500,000 (sales from discontinued operation)

    [7] $2,000,000 - 320,000 (cost of goods sold from discontinued
operation)

    [8] $675,000 - 40,000 (administrative expenses from discontinued
operations)

    [9] $312,000 - 30,000 (selling expenses from discontinued
operations)
Problem 4-4
Requirement 1

                                  MICRON CORPORATION
                                    Partial Income Statement
                             For the Year Ended December 31, 2006
    Income from continuing operations before
      income taxes and extraordinary item ........                                   [1] $1,300,000
    Income tax expense ....................................                                 390,000
    Income from continuing operations ............                                          910,000
    Discontinued operations:
      Loss from operations of discontinued
       component (including loss on disposal of
        $300,000) .................................................   $ (140,000)
      Income tax benefit ....................................             (42,000)
     Loss on discontinued operations ..............                                  [2]     (98,000)
    Income before extraordinary item ..............                                          812,000
    Extraordinary item:
    Gain from early extinguishment of debt
         (net of $120,000 tax expense) ....................                                   280,000
    Net Income ..................................................                          $1,092,000

   [1] Income from continuing operations before taxes:
       Unadjusted                                    $1,200,000
       Add: Gain from sale of factory                   100,000
       Adjusted                                      $1,300,000
   [2] Loss on discontinued operations:
       Operating income                                                       $ 160,000
       Deduct: Loss on sale of assets                                          (300,000)
       Loss before tax                                                         (140,000)
       Tax benefit (30% x $140,000)                                               42,000
       Loss on discontinued operations                                         $ (98,000)
Requirement 2
    These events will not, or are unlikely to occur again in the near future.
By segregating them, users are better able to predict future cash flows.

								
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