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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Comprehensive: Income Statement and Retained Earnings Milwaukee Manufacturing Company presents the following partial list of account balances, after adjustments, as of December 31, 2019:

Chapter 5, Problem 16P, Comprehensive: Income Statement and Retained Earnings Milwaukee Manufacturing Company presents the , example  1

The following information is also available but is not reflected in the preceding accounts:

  1. a. The company sold Division E (a major component of the company) on August 2, 2019. During 2019, Division E had incurred a pretax loss from operations of $16,000. However, because the acquiring company could vertically integrate Division E into its facilities, Milwaukee Manufacturing was able to recognize a $42,000 pretax gain on the sale.
  2. b. On January 2, 2019, without warning, a foreign country expropriated a factory of Milwaukee Manufacturing which had been operating in that country. As a result of that expropriation, the company has incurred a pretax loss of $30,000.
  3. c. The common stock was outstanding for the entire year. A cash dividend of $1.20 per share was declared and paid in 2019.
  4. d. The 2019 income tax expense totals $31,050 and consists of the following:

Chapter 5, Problem 16P, Comprehensive: Income Statement and Retained Earnings Milwaukee Manufacturing Company presents the , example  2

Required:

  1. 1. As supporting documents for Requirement 2, prepare separate supporting schedules for selling expenses and for general and administrative expenses (include depreciation expense where applicable in these schedules).
  2. 2. Prepare а 2019 multiple-step income statement for Milwaukee Manufacturing.
  3. 3. Prepare a 2019 retained earnings statement.
  4. 4. Next Level What was Milwaukee Manufacturing’s return on common equity for 2019 if its average shareholders’ equity during 2019 was $500,000? What is your evaluation of this return on common equity if its “target” for 2019 was 15%?
  5. 5. Next Level Discuss how Milwaukee Manufacturing’s income statement in Requirement 2 might be different if it used IFRS.

1.

To determine

Prepare a separate schedule for both selling and general and administrative expenses of Company M for the year ended December 31, 2019.

Explanation

Expenses: Expenses are costs incurred for the operations of a business. The costs incurred for generating revenues are rent expense, depreciation expense, general and administrative expenses, selling expenses, and utilities expense.

Prepare a separate schedule for both selling and general and administrative expenses of Company M for the year ended December 31, 2019 as follows:

Company M
For Year Ended December 31, 2019
Schedule 1: Selling Expenses
ParticularsAmounts ($)
Sales salaries expense$27,400
Delivery expenses11...

2.

To determine

Prepare a multi-step income statement of Company M for the year ended December 31, 2019.

3.

To determine

Prepare a retained earnings statement of Company M for the year ended December 31, 2019.

4.

To determine

Ascertain the return on common equity of Company M for 2019 and comment.

5.

To determine

State the manner in which the income statement of Company M given in requirement 2 gets differs, if it uses IFRS.

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