Exercise 1: Income Statement: Presented below is information related to Farr Com
ID: 2789263 • Letter: E
Question
Exercise 1: Income Statement:
Presented below is information related to Farr Company.
Retained earnings, December 31, 2010 $ 650,000
Sales 1,500,000
Selling and administrative expenses 240,000
Hurricane loss (pre-tax) on plant (extraordinary item) 290,000
Cash dividends declared on common stock 33,600
Cost of goods sold 780,000
Gain resulting from computation error on depreciation charge in 2009 (pre-tax) 520,000
Other revenue 120,000
Other expenses 100,000
Instructions
Prepare in good form a multiple-step income statement for the year 2011. Assume a 30% tax rate and that 80,000 shares of common stock were outstanding during the year.
Solution:
Exercise 2: Statement of Financial Position
Given the following account information for Leong Corporation, prepare a balance sheet in report form for the company as of December 31, 2010. All accounts have normal balances.
Equipment 40,000
Interest Expense 2,400
Interest Payable 600
Retained Earnings ?
Dividends 50,400
Land 137,320
Inventory 102,000
Bonds Payable 78,000
Notes Payable (due in 6 months) 14,400
Common Stock 70,000
Accumulated Depreciation - Eq. 10,000
Prepaid Advertising 5,000
Revenue 331,400
Buildings 80,400
Supplies 1,860
Taxes Payable 3,000
Utilities Expense 1,320
Advertising Expense 1,560
Salary Expense 53,040
Salaries Payable 900
Accumulated Depr. - Bld. 15,000
Cash 50,000
Depreciation Expense,
Building & Equipment 8,000
Solution:
Explanation / Answer
Answer 1) FARR COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED 31.12.2011
SALES REVENUE $ 1500,000
COST OF GOODS SOLD 780000
GROSS PROFIT 620000
SELLING AND ADMINISTRATIVE EXP 240000
INCOME FROM OPERATIONS 380000
OTHER REVENUE 120000
OTHER EXPENSES (100000)
INCOME BEFORE TAXES 400000
INCOME TAXES 120000
INCOME BEFORE EXTRAORDINARY ITEM 280000
EXTRAORDINARY LOSS ,NET OF APPLICABLE
INCOME TAXES OF $ 870000 (203000)
NET INCOME $ 77000
PER SHARE OF COMMON STOCK
INCOME BEFORE EXTRAORDINARY ITEM $3.50
EXTRAORDINARY ITEM ,NET OF TAX (2.54)
NET INCOME $ .96
ANSWER 2) LEONG CORPORATION
BALANCE SHEET
31.12.2010
RETAINED EARNINGS
REVENUE= $ 341400
LESS SALARIES EXP 53040
DEPRECIATION EXP 8000
INTEREST EXP 2400
ADVERTISING EXP 1560
UTILITIES EXP 1320
275080
ASSETS $ $ $ CASH 50000 INVENTORY 102000 SUPPLIES 1860 PREPAID ADVERTISING 5000 TOTAL CURRENT ASSETS 158860 LAND 137320 BUILDING 80400 ACCUMULATED DEP 15000 65400 EQUIPMENT 40000 ACCUMULATED DEP 10000 30000 232720 TOTAL ASSETS 391580 LAIBILITIES & STOCK HOLDERS EQUITY NOTES PAYABLE 14400 TAXES PAYABLE 3000 SALARIES PAYABLE 900 INTEREST PAYABLE 600 TOTAL CURRENT LIABILITIES 18900 LONG TERM LIABILITIES BONDS PAYABLE 78000 TOTAL LIABILITIES 96900 COMMON STOCK 70000 RETAINED EARNINGS (275080-$ 50400) 224680 TOTAL STOCKHOLDERS EQUITY 294680 TOTAL LIABILITIES & STOCK HOLDERS EQUITY 391580Related Questions
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