FinancialReportingandAnalysis财务报告与分析smch04.docx

FinancialReportingandAnalysis财务报告与分析smch04.docx

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FinancialReportingandAnalysis财务报告与分析smch04

FinancialReportingandAnalysis财务报告与分析-sm_ch04

Chapter4

IncomeStatement

TOTHENET

1.a.$19,400,000

Equityearnings（losses）aretheinvestor’sproportionate

shareoftheinvestee’searnings（losses）.

b.$20,100,000

Ifafirmconsolidatesubsidiariesnotwhollyowned,the

totalrevenuesandexpensesofthesubsidiariesareincluded

withthoseoftheparent.However,todeterminetheincome

thatwouldaccruetotheparent,itisnecessarytodeduct

theportionofincomethatwouldbelongtotheminority

shares.

2.a.NetSales

$3,122,433,000（2001）

$2,761,983,000（2000）

$1,639,839,000（1999）

b.LossfromOperations

$412,257,000（2001）

$863,880,000（2000）

$605,755,000（1999）

c.InterestExpense

$139,232,000（2001）

$130,921,000（2000）

$84,566,000（1999）

d.Materialincreaseinsales,butthishasnotresultedin

operatingprofits.Inadditiontotheoperatinglossesthere

hasbeenmaterialinterestexpense.

68

QUESTIONS

4-1.Extraordinaryitemsareeventsortransactionsthatare

distinguishedbytheirunusualnatureandinfrequencyof

occurrence.Theymightincludecasualtylossesorlossesfrom

expropriationorprohibition.Theymustbeshownseparately,

netoftax,inorderthattrendanalysiscanbemadeofincome

beforeextraordinaryitems.

4-2.d,f

4-3.Examplesincludesalesofsecurities,write-downof

inventories,disposalofaproductlinenotqualifyingasa

segment,gainorlossfromalawsuit,etc.Theyareshown

separatelybecauseoftheirmaterialityandthedesire

toachievefulldisclosure.Theyarenotgivennet-of-tax

treatmentbecausetheyareincludedinincomebeforethe

incometaxisdeducted.Also,net-of-taxtreatmentwould

inferthattheseitemsareextraordinary.

4-4.Undertheequitymethod,equityinearningsof

nonconsolidatedsubsidiariesisaprobleminprofitability

analysisbecausetheincomerecognizedisnotacashinflow.

Thecashinflowisonlytheamountoftheinvestorshareof

dividendsdeclaredandpaid.Further,equityearningsdonot

comedirectlyfromtheoperationsofthebusinessinquestion,

butratherfromasubsidiary.

4-5.Itwouldappearthatthisisthedisposalofaproductline

thatisspecificallyseparatefromthedairyproductsline.

Thedisposalofthevitaminlineshouldbeidentifiedas

discontinuedoperationsandbepresentedafterincomefrom

continuingoperationsontheincomestatement.

4-6.Unusualorinfrequentitemsrelatetooperations.Examples

arewrite-downsofreceivablesandwrite-downsofinventory.

4-7.In2000,thecumulativeeffectofthenewchangewouldbe

presentedontheincomestatementasareduction,netoftax,

afteranyextraordinaryitemsandjustbeforenetincome.

69

4-8.Thedeclarationofacashdividendreducesretainedearnings

andincreasescurrentliabilities.Thepaymentofacash

dividendreducescurrentliabilitiesandcash.

4-9.First,astocksplitisusuallyforalargernumberofshares.

Secondly,astockdividendreducesretainedearningsand

increasespaid-incapital.Astocksplitmerelyincreases

thesharesandreducestheparvalue,leavingthecapital

stockaccountintact.Bothrequirerestatementofanyper

shareitems.

4-10.Ifafirmconsolidatessubsidiariesthatarenotwhollyowned,

thetotalrevenuesandexpensesofthesubsidiariesare

includedwiththoseoftheparent.Todeterminetheincome

thatwouldaccruetotheparent,however,itisnecessaryto

deducttheportionofincomethatwouldbelongtotheminority

owners.

4-11.Thestatementofretainedearningssummarizesthechangesto

retainedearnings.Retainedearningsrepresentsthe

undistributedearningsofthecorporation.Theincome

statementnetincomeisaddedtoretainedearnings.Aloss

isdeductedfromretainedearnings.

4-12.1.Appropriationsasaresultofalegalrequirement.

2.Appropriationsasaresultofacontractualagreement.

3.Appropriationsasaresultofmanagementdiscretion.

Appropriationsasaresultofmanagementdiscretionarenot

likelyadetrimenttothepaymentofadividend.

4-13.Thebalancesheetshowstheaccountbalancesasofa

particularpointintime.Theincomestatementshowsthe

revenuesandexpensesresultingfromtransactionsforthe

periodoftime.

4-14.a.Minorityshareofearningsisanincomestatementitem

thatrepresentstheminorityowners'shareof

consolidatedearnings.

b.Equityinearningsistheproportionateshareofthe

earningsoftheinvestorthatrelatetotheinvestor's

investment.

70

4-15.Thetwotraditionalformatsforpresentingtheincome

statementarethemultiple-stepandsingle-step.The

multiple-stepispreferableforanalysisbecauseitprovides

intermediateprofitfiguresthatareusefulinanalysis.

200320022001

4-16.Earningspershare$1.40$1.00$.80

4-17.Accountantshavenotacceptedtheroleofdisclosingthefirms

capacitytomakedistributionstostockholders.Therefore,

thefirmscapacitytomakedistributionstostockholders

cannotbedeterminedusingpublishedfinancialstatements.

4-18.Managementdoesnotusuallyliketotiecomprehensiveincome

closelywiththeincomestatementbecausetheitemswithin

accumulatedothercomprehensiveincomehavethepotentialto

bevolatile.

71

PROBLEMS

PROBLEM4-1

a.DecherAutomotives

IncomeStatement

FortheYearEndedDecember31,2003

Sales$1,000,000

Costofsales

Beginninginventory$650,000

Purchases460,000

Merchandiseavailableforsale$1,110,000

Less:

Endinginventory440,000

Costofsales670,000

Grossprofit330,000

Operatingexpense:

Sellingexpenses$43,000

Administrativeexpenses62,000105,000

Operatingincome225,000

Otherincome:

Dividendincome10,000

235,000

Otherexpense:

Interestexpense20,000

Incomebeforetaxesand

extraordinaryitems215,000

Incometaxes100,000

Incomebeforeextraordinaryitems115,000

Extraordinaryitems:

floodloss,netoftax（30,000）

Netincome$85,000

b.Earningspershare:

Beforeextraordinaryitems$1.15

Extraordinaryitems（loss）（.30）

Netincome$.85

72

c.DecherAutomotives

IncomeStatement

FortheYearEndedDecember31,2003

Revenue:

Sales$1,000,000

Otherincome10,000

Totalrevenue1,010,000

Expenses:

Costofsales$670,000

Operatingexpenses105,000

Interestexpense20,000795,000

Incomebeforetaxesand

extraordinaryitems215,000

Incometaxes100,000

Incomebeforeextraordinaryitems115,000

Extraordinaryitems,floodloss,

netoftax30,000

Netincome$85,000

PROBLEM4-2

LeskyCorporation

IncomeStatement

FortheYearEndedDecember31,2003

Revenuefromsales$362,000

Costofproductssold242,000

Grossprofit120,000Operatingexpenses:

Sellingexpenses$47,000

Administrativeandgeneral

expenses11,40058,400

Operatingincome61,600

Otheritems:

Otherincome:

Rentalincome$1,000

Interestincome2,4003,400

Otherexpense:

Interestexpense（2,200）

Incomebeforetax62,800Federalandstateincometaxes20,300

Netincome$42,500

73

PROBLEM4-3

CONSOLIDATEDCAN

IncomeStatement

FortheYearEndedDecember31,2003

Sales$480,000

Costofproductssold410,000

Grossprofit70,000

Sellingandadministrativeexpenses42,000

Operatingincome28,000

Otherincome1,600

29,600

Interestexpense8,700

Incomebeforetaxandextraordinaryitems20,900

Incometax9,300

Incomebeforeextraordinaryitems11,600

Extraordinarygain,netoftax1,000

Netincome12,600

Retainedearnings1/1270,000

282,600

Less:

dividends3,000

Retainedearnings$279,600

PROBLEM4-4

a.TaperlineCorporation

IncomeStatement

FortheYearEndedDecember31,2003

Revenues:

Sales$670,000

Rentalincome3,600

Gainonthesaleoffixedassets3,000

Totalrevenues676,600

Expenses:

Costofsales$300,000

Sellingexpenses97,000

Generalandadministrative

expenses110,000

Depreciation10,000

Interestexpense1,900518,900

Incomebeforeextraordinaryitems

andtaxesonincome157,700

Incometax63,080

Earningsbeforeextraordinaryitem94,620

Casualtyloss$30,000

Less:

Taxsaving12,00018,000

Netincome$76,620

74

Earningspershareoncommonstock:

（30,000sharesoutstanding）

Incomebeforeextraordinaryitems$3.15

Netincome$2.55

b.

TaperlineCorporation

IncomeStatement

FortheYearEndedDecember31,2003

Sales$670,000

Costofsales300,000

Grossprofit370,000

Operatingexpenses

Sellingexpenses$97,000

Generalandadministrative

expenses110,000

Depreciation10,000217,000

Operatingincome153,000

Otherrevenue:

Rentalincome$3,600

Gainonthesaleoffixedassets3,0006,600

159,600

Otherexpenses:

Interestexpense1,900

Incomebeforeextraordinaryitems

andtaxesonincome157,700

Incometax63,080

Incomebeforeextraordinaryitem94,620

Casualtyloss$30,000

Less:

Taxsaving12,00018,000

Netincome$76,620

Earningspershareoncommonstock:

（30,000sharesoutstanding）

Incomebeforeextraordinaryitems$3.15

Netincome$2.55

75

PROBLEM4-5

TaxRate=Taxes.=$20,000=50%

IncomeBefore$40,000

Taxes

Provisionforunusualwrite-offs$50,000

Less:

taxeffects（50%x$50,000）25,000

Netitem$25,000

Extraordinarycharge,netoftaxof

$10,000$50,000

Netearnings（loss）（30,000）

Netearningswithnonrecurringitems

removed（[$30,000）+$25,000+$50,000]$45,000

PROBLEM4-6

Sales$4,000,000

Costofsales2,000,000

Grossprofit2,000,000

Operatingexpenses:

1Administrativeexpenses$40i.0002Sellingexpense600,0001,000,000

Operatingincome1,000,0003Interestexpe