1.
Introduction: An income statement is a financial statement that represents the net income earned or net loss incurred by the business during a particular period. It considers all the expenses incurred during the period against the revenue earned the net value determined is known as the profit or loss of the business.
Revised income statement according to generally accepted accounting principles.
2.
Introduction: An income statement is a financial statement that represents the net income earned or net loss incurred by the business during a particular period. It considers all the expenses incurred during the period against the revenue earned the net value determined is known as the profit or loss of the business.
The amount to be presented for discontinued operations.
3.
Introduction: An income statement is a financial statement that represents the net income earned or net loss incurred by the business during a particular period. It considers all the expenses incurred during the period against the revenue earned the net value determined is known as the profit or loss of the business.
The amount to be presented for discontinued operations.
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Intermediate Accounting, 10 Ed
- Ethics and Sale of Operating Component It is the end of 2019, and, as an accountant for Newell Company, you are preparing its 2019 financial statements. On December 29, 2019, Newells management decided to sell one of its major divisions, subject to some legal work that is expected to be completed during the first week in April 2020 after the 2019 financial statements have been issued). During 2019, the division earned a small operating income that is just enough for the company to report record earnings for the year. However, the estimated fair value of the division at the end of 2019 is less than its net book value, so that management anticipates the component will be sold at a loss. Newells president stops by your office and says, You have been doing a fine job. Keep up the good work because you are heading for a promotion in early 2021. Once we report the record earnings for 2019, our shareholders and creditors will be happy. Then I think our earnings for 2020 will be high enough so that the loss we expect to report in 2020 on the sale of the division will not look so bad. After the president leaves your office, you continue preparing the 2019 financial statements. Required: From financial reporting and ethical perspectives, what information, if any, will you include about the upcoming sale of the division in the 2019 financial statements?arrow_forwardShannon Corporation began operations on January 1, 2019. Financial statements for the years ended December 31, 2019 and 2020, contained the following errors: In addition, on December 31, 2020, fully depreciated machinery was sold for 10,800 cash, but the sale was not recorded until 2021. There were no other errors during 2019 or 2020, and no corrections have been made for any of the errors. Refer to the information for Shannon Corporation above. Ignoring income taxes, what is the total effect of the errors on the amount of working capital (current assets minus current liabilities) at December 31, 2020? a. working capital overstated by 4,200 b. working capital understated by 5,800 c. working capital understated by 6,000 d. working capital understated by 9,800arrow_forwardOn September 17, 2021, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2021, the company’s fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division’s assets at the end of the year was $11 million. The pretax income from operations of the division during 2021 was $4 million. Pretax income from continuing operations for the year totaled $14 million. The income tax rate is 25%. Ziltech reported net income for the year of $7.2 million.Required:Determine the book value of the division’s assets on December 31, 2021.arrow_forward
- The following are partial income statement account balances taken from the December 31, 2021, year-end trial balance of White and Sons, Inc.: restructuring costs, $300,000; interest revenue, $40,000; before-tax loss on discontinued operations, $400,000; and loss on sale of investments, $50,000. Income tax expense has not yet been recorded. The income tax rate is 25%. Prepare the lower portion of the 2021 income statement beginning with $800,000 income from continuing operations before income taxes. Include appropriate EPS disclosures. The company had 100,000 shares of common stock outstanding throughout the year.arrow_forwardOn September 17, 2021, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2021, the company’s fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division’s assets at the end of the year was $14 million. The pretax income from operations of the division during 2021 was $3 million. Pretax income from continuing operations for the year totaled $17 million. The income tax rate is 25%. Ziltech reported net income for the year of $5.7 million. Required:Determine the book value of the division's assets on December 31, 2021. (Enter your answer in whole dollars not in millions.)arrow_forwardOn September 17, 2021, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2021, the company’s fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division’s assets at the end of the year was $16 million. The pretax income from operations of the division during 2021 was $6 million. Pretax income from continuing operations for the year totaled $19 million. The income tax rate is 25%. Ziltech reported net income for the year of $9.0 million. Required: Determine the book value of the division's assets on December 31, 2021. (Enter your answer in whole dollars not in millions.)arrow_forward
- On September 17, 2021, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2021, the company’s fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division’s assets at the end of the year was $13 million. The pretax income from operations of the division during 2021 was $3 million. Pretax income from continuing operations for the year totaled $16 million. The income tax rate is 25%. Ziltech reported net income for the year of $8.1 million. Determine the book value of the division's assets on December 31, 2021.arrow_forwardSydMel Ltd commences operations on 1 July 2020. One year later, on 30 June 2021, the entity prepares its first statement of comprehensive income and its first statement of financial position. The statements are prepared before considering taxation. The following information is available. Statement of Profit or Loss and other Comprehensive IncomeFor the year ended 30 June 2021Gross Profit $610,000Salaries expenses (210,000)Rent expense (53,000)Long service leave expenses (51,000)Depreciation expense - Plant (30,000)Bad debt expense (18,000)Accounting Profit Before Tax $248,000 The Statement of Financial Position (Extract/partial)As at 30 June 2021Assets: Cash $152,000Inventories 198,000Account receivables (net) 178,000Prepaid rent 51,000Plant 150,000Accumulated depreciation - plant (30,000) 699,000Liabilities: Revenue received in advance 53,000Accounts payable 90,000Loan payable 210,000Provision for long service leave 49,000…arrow_forwardOn September 17, 2018, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2018, the company’sfiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair valueminus costs to sell) of the division’s assets at the end of the year was $11 million. The pretax income from operations of the division during 2018 was $4 million. Pretax income from continuing operations for the year totaled$14 million. The income tax rate is 40%. Ziltech reported net income for the year of $7.2 million.Required:Determine the book value of the division’s assets on December 31, 2018.arrow_forward
- Complete the following tasks: a. Consider the following worksheet with information extracted from a financial statement: 2018 Assets Liabilities Equity Reported ($) 500 000 100 000 400 000 An analyst makes an adjustment that decreases goodwill by $100 000 and equity (profit) by $100 000. This goodwill was acquired on consolidation, hence there are no tax adjustments. Using the worksheet approach, what would be the change in the debt to assets ratio? b. Consider the following information: Net working capital/total assets = 0.9 Retained earnings/total earnings = 0.15 EBIT/total assets = 1.1 MV of equity/BV of total liabilities = 2 Sales/total assets = 2.5 Compute the Z-score. Is there a likelihood of financial distress?arrow_forwardSydMel Ltd commences operations on 1 July 2020. One year later, on 30 June 2021, the entity prepares its first statement of comprehensive income and its first statement of financial position. The statements are prepared before considering taxation. The following information is available. Statement of Profit or Loss and other Comprehensive Income For the year ended 30 June 2021 Gross Profit $610,000 Salaries expenses (210,000) Rent expense (53,000) Long service leave expenses (51,000) Depreciation expense - Plant (30,000) Bad debt expense (18,000) Accounting Profit Before Tax $248,000 The Statement of Financial Position (Extract/partial) As at 30 June 2021 Assets: Cash $152,000 Inventories 198,000 Account receivables (net) 178,000 Prepaid rent 51,000 Plant 150,000 Accumulated depreciation - plant (30,000) 699,000 Liabilities: Revenue received in advance 53,000…arrow_forwardWOODBRICKS CORP. decided on September 1, 2021 to dispose of a component of business. The component was sold on October 31, 2021. The net income of WOODBRICKS CORP. for the year 2021 included income of P8,000,000 from operating the discontinued segment from January 1 to the date of disposal. The entity incurred a loss of P3,000,000 on the October 31 sale of the business component. What amount should be reported as pretax income or loss from discontinued operations for 2021?arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning