BuyFindarrow_forward

Intermediate Accounting: Reporting...

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

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
74 views

Income Statement and Retained Earnings Huff Company presents the following items derived from its December 31, 2019, adjusted trial balance:

Chapter 5, Problem 17E, Income Statement and Retained Earnings Huff Company presents the following items derived from its

The following information is also available for 2019 and is not reflected in the preceding accounts:

  1. 1. The common stock has been outstanding all year. A cash dividend of $1.28 per share was declared and paid.
  2. 2. Land was sold at a pretax gain of $6,300.
  3. 3. Division X (a major component of the company) was sold at a pretax gain of $4,700. It had incurred a $9,500 pretax operating loss during 2019.
  4. 4. A tornado, which is an unusual event in the area, caused a $5,400 pretax loss.
  5. 5. The income tax rate on all items of income is 30%.
  6. 6. The average shareholders’ equity is $90,000.

Required:

  1. 1. Prepare a 2019 multiple-step income statement for Huff.
  2. 2. Prepare a 2019 retained earnings statement.
  3. 3. Compute the 2019 return on common equity (Net Income 4 Average Shareholders’ Equity).

1.

To determine

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

Explanation

Multi step income statement: A multiple step income statement refers to the income statement that shows the operating and non-operating activities of the business under separate head. In different steps of the multi-step income statement, principal operating activities are reported that starts from the record of sales revenue with all contra sales revenue account like sales returns, allowances and sales discounts.

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

Company H
Multi-Step Income Statement
For the Year Ended December 31, 2019
ParticularsAmountAmount
($)($)
Sales$124,000 
Less: Cost of goods sold($66,200) 
Gross profit $57,800
Operating expenses ($30,400) 
Operating income $27,400
Other items  
Gain on sale of land$6,300 
Loss caused by tornado($5,400) 
Interest expense(3,700)($2,800
Income before income tax $24,600
Income tax expense (1) ($7,380)
Income from continuing operations $17,200
Results from discontinue division:  
Loss from operations of discontinued division X

2.

To determine

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

3.

To determine

Compute the return on common equity for the year ended 2019.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Define big data analytics.

Accounting Information Systems

How is a DBMS different from a database?

Accounting Information Systems

Differentiate between dealer markets and stock markets that have a physical location.

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

Explain why payroll processing centers and electronic systems are commonly used in payroll accounting.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

Differentiate between ROE and ROIC.

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)