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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