Northport Company had prepared the following tentative income statement for the

Question

Northport Company had prepared the following tentative income statement for the yeur ended December 31, 2016. Northport Company Income Statoment For the year anded December 31, 2016 Sales Cost of Goods Sold Gross Profit Selling and General Expensos Loss on Gain on equipment Interest Expense Net Income before taxes Income taxes at 30% Net Incone 2,200,000 1,000,000 670,000 200,000 (30,000) 140,000 98,000 The following information becomes available to you before the 2016 statemens are issuod 1. On July 1, 2016, the decision was made to discontinue the sale of the wornen's accessories. Operating results for the segment are included in the above income statement Results for the discontinuod segment were as follows: Secon July 1-Dec.31. 2016 120,000 100,000 50,000 Jan. 1-June 30, 2016 Sales Cost of goods sold 260,000 120,000 2. There will continue to be some operations in the first two months of 2017. It is predicted that the operating loss will be $15,000 Late in 2016, equipment used by this segment with a book value of $130,000 was sold for $160,000. The gain is reflected in the above income statement. Remaining equipment used by this segment has a book value of $80,000 and it is anticipated that it will sell for a net price of $62,000. 3. 4. You might think the earthquake loss is extraordinary, but it is no longer shown net of tax. It is just "other" 5. The inventory balance on Dec. 31, 2015 (end of prior year) was discovered to be overstated by $5,000. All inventory involved pertained to continuing operations. Interest expense applicable to financing of inventory of S10,000 is included in Selling and General Expenses. Retained carnings on Dec. 31, 2015 was $340,000. Dividends paid during 2016 were $20,000 6. 7. A. Prepare in good form, a corrected multiple step income statement for 2016 (gnore information in B. Prepare a statement of retained eamings for December 31, 2016 ignore information in Pan C) C. Assume during 2017 the of the women's accessories division was completed with the following results Cash for sale of equipment with original book value of $80,000 was $$6,000 Operations, sales $20,000, cost of goods sold $17,000, expenses $15,000 Using this information prepare in good form the discontinued operations section of the 2017 Income Statement-again assuming a 30% tax rate. 50

Explanation / Answer

A. Income Statement (Corrected):

B. Retained Earnings for 2016:

C. Discontinued Operations Income Statement for 2017:

Particulars Amount (in USD) Revenue: Sales 2,200,000 Direct Expenses: Opening Inventory reinstated -5,000 Cost of Goods Sold 1,200,000 Gross Profit: 1,005,000 Selling and General Expenses 660,000 Other (Loss on Earthquake) 200,000 Gain on Equipment (Sold during the year) -30,000 Interest Expenses 30,000 Profit before Taxes: 145,000 Tax @ 30% 43,500 Net Income: 101,500

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.