Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 5, Problem 6E
To determine
Identify that the presentation of facts in Company D’s income statement is appropriate or not. If not specify the appropriate presentation and discuss the same.
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Reporting Discontinued Operations
On October 31, 2020, Leigh Corp. approved a formal plan to dispose of its Knit Products Division. On December 31, 2020, the Knit Products Division was held for sale but had not been sold. The Knit Products Division (considered a separate business component) reported a net loss from operations of $1,515,000 before tax for the year ended December 31, 2020. The Knit Products Division has a book value and fair value (after selling expenses) of $10,800,000 and $9,900,000, respectively. Leigh Corp. reported income from continuing operations of $2,700,000 before tax for 2020.
a. Assuming an income tax rate of 25%, prepare an income statement beginning with Income from Continuing Operations. Ignore earnings per share disclosures.
Use a negative sign to indicate a loss.
Leigh Corp.
Income Statement
Year Ended December 31, 2020
Income from continuing operations
Discontinued operations
Loss from discontinued operations, net of…
The Kelly Services, Inc., and subsidiaries partial statement s of earnings from its annual report are presented below.
2020
2019
Revenues from services
4314.8
5517.3
Cost of services
3613.1
4539.7
Gross Profit
701.7
977.6
Selling and administrative expense
794.7
967.4
Asset impairments
53.1
80.5
Net earnings (loss)
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(70.3)
Prepare a horizontal common size analysis, and comment on the trend.
Problem:
Remesh Corporation prepared the following income statement and statement of retained earnings for the year ended December 31, 2021.
Remesh Corporation
December 31, 2021
Expense and Profit Statement
Dollars in thousands
Sales (net)
$206,000
Less: Selling Expenses
(20,600)
Net Sales
$185,400
Add: Interest Revenue
2,400
Add: Gain on sale of equipment
3,600
Gross Sales Revenue
$191,400
Less: Cost of operations:
Cost of Goods Sold
$126,100
Correction of overstatement in last years income because of error $5,500 (net of tax credit)
$3850
Dividend cost ($0.50 per share for 8k common shares)
$4000
Unusual loss due to a hurricane, $6,400 (net of tax credit)
$1,920
($135,870)
Taxable Revenues
$55,530
Less: Income tax on income from continuing operations
$16,659
Net income
$38871
Miscellaneous Deductions
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Chapter 5 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 5 - In general, how does the income statement help...Ch. 5 - Prob. 2GICh. 5 - Define income under the capital maintenance...Ch. 5 - Prob. 4GICh. 5 - What is net income?Ch. 5 - What three things must a company determine to...Ch. 5 - Prob. 7GICh. 5 - Prob. 8GICh. 5 - Give an example and explanation for each of the...Ch. 5 - Define expenses. What do expenses measure?
Ch. 5 - Prob. 11GICh. 5 - Define gains and losses. Give examples of three...Ch. 5 - Prob. 13GICh. 5 - What items are included in a companys income from...Ch. 5 - How are unusual or infrequent gains or losses...Ch. 5 - What is interperiod tax allocation?Ch. 5 - Prob. 17GICh. 5 - Prob. 18GICh. 5 - Prob. 19GICh. 5 - Prob. 20GICh. 5 - Prob. 21GICh. 5 - Prob. 22GICh. 5 - Prob. 23GICh. 5 - Prob. 24GICh. 5 - Prob. 25GICh. 5 - Prob. 26GICh. 5 - Prob. 27GICh. 5 - Prob. 28GICh. 5 - Prob. 29GICh. 5 - Prob. 30GICh. 5 - What is the rate of return on common equity? What...Ch. 5 - Prob. 32GICh. 5 - Prob. 33GICh. 5 - Which of the following is expensed under the...Ch. 5 - The following information is available for Cooke...Ch. 5 - The following information is available for Wagner...Ch. 5 - Prob. 4MCCh. 5 - A loss from the sale of a component of a business...Ch. 5 - In a statement of cash flows, receipts from sales...Ch. 5 - Brandt Corporation had sales revenue of 500,000...Ch. 5 - Refer to RE5-1. Prepare a single-step income...Ch. 5 - Shaquille Corporation began the current year with...Ch. 5 - Dorno Corporation incurred expenses during the...Ch. 5 - Niler Corporation reported the following after-tax...Ch. 5 - Jordan Corporation reported retained earnings of...Ch. 5 - Prob. 7RECh. 5 - Prob. 8RECh. 5 - Amelias Bookstore reported net income of 62,000...Ch. 5 - Prob. 10RECh. 5 - Prob. 1ECh. 5 - Cost of Goods Sold and Income Statement Schuch...Ch. 5 - Income Statement Calculation OConnor Companys...Ch. 5 - Results of Discontinued Operations On November 30,...Ch. 5 - Multiple-Step and Single-Step In coin Statements...Ch. 5 - Prob. 6ECh. 5 - Multiple-Step and Single-Step Income Statements,...Ch. 5 - Cost of Goods Sold, Income Statement. and...Ch. 5 - Net Cash Flow from Operating Activities The...Ch. 5 - Prob. 10ECh. 5 - Statement of Cash Flows The following items...Ch. 5 - Statement of Cash Flows The following are several...Ch. 5 - Classifications Where would each of the following...Ch. 5 - Rate of Change nalyses eiher Company presents the...Ch. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Income Statement and Retained Earnings Huff...Ch. 5 - Prob. 18ECh. 5 - Interim Reporting (Appendix 5.1) Miller Company...Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Income Statement, Lower Portion Cunningham Company...Ch. 5 - Financial Statement Violations of U.S. GAAP The...Ch. 5 - Misclassiflcations Rox Corporations multiple-step...Ch. 5 - Misclassifications Olson Companys bookkeeper...Ch. 5 - Complex Income Statement The following items were...Ch. 5 - Prob. 8PCh. 5 - Financial Statement Deficiencies The following is...Ch. 5 - Comprehensive: Balance Sheet from Statement of...Ch. 5 - Net Income and Comprehensive Income At the...Ch. 5 - Statement of Cash Flows A list of Fischer Companys...Ch. 5 - Statement of Cash Flows The following are Mueller...Ch. 5 - Prob. 14PCh. 5 - Rate of Change Analyses and Ratios Analyses The...Ch. 5 - Comprehensive: Income Statement and Retained...Ch. 5 - Comprehensive: Income Statement and Supporting...Ch. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 1CCh. 5 - Prob. 2CCh. 5 - Prob. 3CCh. 5 - Prob. 4CCh. 5 - Nonrecurring Items Lynn Company sells a component...Ch. 5 - Prob. 6CCh. 5 - Accrual Accounting GAAP requires the use of...Ch. 5 - Ethics and Sale of Operating Component It is the...Ch. 5 - Analyzing Starbuckss Income Statement and Cash...Ch. 5 - Prob. 11C
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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: The following information is also available but is not reflected in the preceding accounts: 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. 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. c. The common stock was outstanding for the entire year. A cash dividend of 1.20 per share was declared and paid in 2019. d. The 2019 income tax expense totals 31,050 and consists of the following: Required: 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. Prepare 2019 multiple-step income statement for Milwaukee Manufacturing. 3. Prepare a 2019 retained earnings statement. 4. Next Level What was Milwaukee Manufacturings 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. Next Level Discuss how Milwaukee Manufacturings income statement in Requirement 2 might be different if it used IFRS.
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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?
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Refer to RE22-2. Assume Heller Company had sales revenue of 510,000 in 2019 and 650,000 in 2020. Prepare Hellers partial income statements (through gross profit) for 2019 and 2020. RE22-2 Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.
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The following is information for Novak Corp. for the year ended December 31, 2020:
Sales revenue
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Loss on inventory due to decline in net realizable value
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Unrealized gain on FV-OCI equity investments
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Loss on disposal of equipment
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Interest income
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71,000
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Administrative expenses
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Here are the comparative income statements of Blue Spruce Corp..
BLUE SPRUCE CORP.Comparative Income StatementFor the Years Ended December 31
2020
2019
Net sales
$540,000
$450,000
Cost of goods sold
441,180
381,600
Gross Profit
98,820
68,400
Operating expenses
67,500
40,500
Net income
$ 31,320
$ 27,900
(a)Prepare a horizontal analysis of the income statement data for Blue Spruce Corp., using 2019 as a base. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000), (20%). Round percentages to 1 decimal place, e.g. 12.1%.)
BLUE SPRUCE CORP.Comparative Income Statementchoose the accounting period
Increase or (Decrease) During 2020
2020
2019
Amount
Percentage
Net sales
$540,000
$450,000
$enter a dollar amount
enter percentages rounded to 1 decimal place
%
Cost of goods sold…
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Misclassifcations Roz Corporation's Multiple- Step income statement and retained earnings statement for the year ended December 31,2019 as developed by its bookeeper are shown here:
You determine that the account balances listed on the statements are correct but are incorrectly calssified in certain cases. The company laces a 30% tax rate. No shares of common stock were issued or retired during 2019
Required:
1. Review both statements and indicate where each incorrectly classified item should be classified.
2 Preoare a correct multiple - step income statement for 2019
3. Determine the correct beginning balance in retained earnings and then prepare a correct 2019 retained earnings statement.
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Forecast an Income StatementSeagate Technology reports the following income statement for fiscal 2019.
SEGATE TECHNOLOGY PLC
Consolidated Statement of Income
For Year Ended June 28, 2019, $ millions
Revenue
$20,780
Cost of revenue
14,916
Product development
1982
Marketing and administrative
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Amortization of intangibles
46
Restructuring and other, net
(44)
Total operating expenses
17,806
Income from operations
2,974
Interest income
168
Interest expense
(448)
Other, net
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Other expense, net
(230)
Income before income taxes
2,744
(Benefit) provision for income taxes
(1,280)
Net income
$4,024
Forecast Seagate’s 2020 income statement assuming the following income statement relations ($ millions).
Revenue growth
5%
Cost of revenue
71.8% of revenue
Product development
9.5% of revenue
Marketing and administrative
4.4% of revenue
Amortization of intangibles
No change
Restructuring and other, net
$0
Interest income
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The comparative statements of Wahlberg Company are presented here.
Wahlberg CompanyIncome StatementFor the Years Ended December 31
2020
2019
Net sales
$1,813,600
$1,750,700
Cost of goods sold
1,007,100
978,000
Gross profit
806,500
772,700
Selling and administrative expenses
519,800
472,000
Income from operations
286,700
300,700
Other expenses and losses
Interest expense
17,100
14,200
Income before income taxes
269,600
286,500
Income tax expense
80,015
77,500
Net income
$ 189,585
$ 209,000
Wahlberg CompanyBalance SheetsDecember 31
Assets
2020
2019
Current assets
Cash
$60,600
$64,600
Debt investments (short-term)
69,100
50,300
Accounts receivable
117,500
102,800
Inventory
123,600
115,600
Total current assets
370,800
333,300…
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FACEBOOK INC.
Consolidated Statement of Income
For Year Ended December 31, $ millions
2018
Revenue
$56,894
Costs and expenses
Cost of revenue
10,411
Research and development
11,329
Marketing and sales
7,846
General and administrative
4,507
Total costs and expenses
34,093
Income from operations
22,801
Interest and other income (expense), net
1,504
Income before provision for income taxes
24,305
Provision for income taxes
3,249
Net income
$21,056
FACEBOOK INC.
Consolidated Balance Sheet
At December 31, $ millions
2018
2017
Current assets
Cash and cash equivalents
$11,075
$8,079
Marketable securities
31,095
34,688
Accounts receivable, net
8,643
5,832
Prepaid expenses and other current assets
1,779
1,020
Total current assets
52,592
49,619
Property and equipment, net
24,683
14,777
Intangible assets, net…
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THE TJX COMPANIES, INC.Consolidated Statements of Income
Fiscal Year Ended ($ thousands)
February 2, 2019
Net sales
$38,972,934
Cost of sales, including buying and occupancy costs
27,831,177
Selling, general and administrative expenses
6,923,564
Pension settlement charge
36,122
Interest expense, net
8,860
Income before provision for income taxes
4,173,211
Provision for income taxes
1,113,413
Net income
$ 3,059,798
Assume that the combined federal and state statutory tax rate is 22%.
a. Compute NOPAT using the formula: NOPAT = Net income + NNE.
Round to the nearest whole number.
b. Compute NOPAT using the formula: NOPAT = NOPBT − Tax on operating profit.
Round to the nearest whole number.
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a. Because of changes in technology, inventory costing P100,000 was written off as obsolete in 2021. The company had never recorded this type of loss before.
b. An unusual earthquake damaged the company's plant on Jan. 10, 2022 resulting in a loss to Erwin of P400,000.
c. A loss of P360,000 was sustained on April 5, 2021 as a result of typhoon damage to the company's warehouse in Davao. Typhoons rarely occur in that area.
d. Prior to 2021, Erwin used an accelerated depreciation method for its plant equipment. In 2021, Anonymous changed to the straight-line method for previously acquired equipment and new…
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