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Mr. Michel

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MATCHING I – 7.5 points
For each of the items listed below, indicate how it should be treated in the financial statements. Use the following letter code for your selections:

a. Ordinary or unusual (but not extraordinary) item on the income statement
b. Discontinued operations
c. Extraordinary item on the income statement
d. Prior period adjustment

______ 1. The bad debt rate was increased from 1% to 2%, thus increasing bad debt expense.

______ 2. A loss incurred from expropriation (the company owned resources in South America which were taken over by a dictator unsympathetic to American business).

________ 3. The company neglected to record its depreciation in the previous year.

________ 4. …show more content…

for 2012: * Depreciation expense of $50,000 (net of tax) was not recorded in prior years. * Unadjusted Beginning Retained Earnings balance is $640,000 * Dividends of $40,000 were declared in 2012. * The company decided to change from FIFO to LIFO inventory pricing, which resulted in a loss of $90,000 (net of tax). * Net Income for 2012= $448,000

Required:
Prepare a statement of Retained earnings for the year ended December31, 2012.

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QUESTION IV- 20 points
Presented below is information related to DELIGHT Company, concerning the year 2012.

Sales revenue $945,000
Investment revenue 19,500
Cost of goods sold 408,500
Selling expenses 145,000 Administrative expense 215,000

Additional information:

* In 2012, Vincent experienced an uninsured earthquake loss in the amount of $200,000 before taxes.

* A machine was sold for $100,000 cash during the year at a time when its book value was $116,000. (Depreciation has been properly recorded.) The company often sells machinery of this type.

* Vincent decided to discontinue its stereo division in 2012. During the current

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