Intermediate AccountingChapter 4.docx

Intermediate AccountingChapter 4.docx

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IntermediateAccountingChapter4

Exercise4-1

Requirement1

SOFIGREEKCORPORATION

IncomeStatement

FortheYearEndedDecember31,2006

Revenuesandgains:

EUR

Sales

1,500,000

Interest

30,000

Gainonsaleofequipment

50,000

Totalrevenuesandgains

1,580,000

Expensesandlosses:

Costofgoodssold

750,000

Salaries

160,000

Depreciation

50,000

Interest

40,000

Rent

25,000

Incometax

190,000

Totalexpensesandlosses

1,215,000

Netincome

365,000

Earningspershare

3.65

Exercise4-1（concluded）

Requirement2

SOFIGREEKCORPORATION

IncomeStatement

FortheYearEndedDecember31,2006

EUR

Salesrevenue

1,500,000

Costofgoodssold

750,000

Grossprofit

750,000

Operatingexpenses:

Salaries

160,000

Depreciation

50,000

Rent

25,000

Totaloperatingexpenses

235,000

Operatingincome

515,000

Otherincome（expense）:

Interestrevenue

30,000

Gainonsaleofequipment

50,000

Interestexpense

（40,000）

Totalotherincome,net

40,000

Incomebeforeincometaxes

555,000

Incometaxexpense

190,000

Netincome

365,000

Earningspershare

3.65

Exercise4-2

Requirement1

THEAVINASHGROUP

StatementofIncomeandComprehensiveIncome（inpart）

FortheYearEndedDecember31,2006

INR

Netincome

1,354,000

Othercomprehensiveincome（loss）:

Foreigncurrencytranslationgain,netoftax

140,000

Unrealizedlossesoninvestmentsecurities,

netoftax

（56,000）

Totalothercomprehensiveincome

84,000

Comprehensiveincome

1,438,000

Requirement2

THEAVINASHGROUP

StatementofComprehensiveIncome

FortheYearEndedDecember31,2006

INR

Netincome

1,354,000

Othercomprehensiveincome（loss）:

Foreigncurrencytranslationgain,netoftax

140,000

Unrealizedlossesoninvestmentsecurities

netoftax

（56,000）

Totalothercomprehensiveincome

84,000

Comprehensiveincome

1,438,000

Exercise4-3

lECOLECORPORATION

StatementofIncomeandComprehensiveIncome

FortheYearEndedDecember31,2006

EUR

Salesrevenue

2,400,000

Costofgoodssold

1,400,000

Grossprofit

1,000,000

Operatingexpenses:

Sellingandadministrative

450,000

Operatingincome

550,000

Otherincome（expense）:

Interestexpense

（40,000）

Incomebeforeincometaxesandextraordinaryitem

510,000

Incometaxexpense*

153,000

Incomebeforeextraordinaryitem

Extraordinaryitem:

Gainonearlydebtextinguishment（netof120,000

taxexpense）

Netincome

Othercomprehensiveincome:

Unrealizedholdinggainsoninvestmentsecurities,

netoftax

Comprehensiveincome

357,000

280,000

637,000

56,000

693,000

Earningspershare:

Incomebeforeextraordinaryitem

Extraordinarygain

Netincome

0.36

0.28

0.64

*30%x510,000

Exercise4-4

Requirement1

LEDHASENCORPORATION

IncomeStatement

FortheYearEndedDecember31,2006

Revenuesandgains:

EUR

Sales

2,400,000

Rentalrevenue

80,000

Totalrevenuesandgains

2,480,000

Expensesandlosses:

Costofgoodssold

1,200,000

Salaries

300,000

Depreciation

100,000

Interest

90,000

Rent

50,000

Lossonsaleofequipment

20,000

Lossfrominventorywrite-down

200,000

Incometaxexpense*

208,000

Totalexpensesandlosses

2,168,000

Incomebeforeextraordinaryitem

Extraordinaryitem:

Lossfromflooddamage（netof48,000taxbenefit）

Netincome

312,000

（72,000）

240,000

Earningspershare:

Incomebeforeextraordinaryitem

Extraordinaryloss

Netincome

1.04

（.24）

.80

*40%x520,000

Exercise4-4（concluded）

Requirement2

LEDHASENCORPORATION

IncomeStatement

FortheYearEndedDecember31,2006EUR

Salesrevenue

2,400,000

Costofgoodssold

1,200,000

Grossprofit

1,200,000

Operatingexpenses:

Salaries

300,000

Depreciation

100,000

Rent

50,000

Lossfrominventorywrite-down

200,000

Totaloperatingexpenses

650,000

Operatingincome

550,000

Otherincome（expense）:

Rentalrevenue

80,000

Lossonsaleofequipment

（20,000）

Interestexpense

（90,000）

Totalotherincome（expense）,net

（30,000）

Incomebeforetaxesandextraordinaryitem

520,000

Incometaxexpense*

208,000

Incomebeforeextraordinaryitem

Extraordinaryitem:

Lossfromflooddamage（netof48,000taxbenefit）

Netincome

312,000

（72,000）

240,000

Earningspershare:

Incomebeforeextraordinaryitem

Extraordinaryloss

Netincome

1.04

（.24）.80

*40%x520,000

Exercise4-5

ALIANTCOMPANY

PartialIncomeStatement

FortheYearEndedDecember31,2006

EUR

Incomefromcontinuingoperations

350,000

Discontinuedoperations:

Lossfromoperationsofdiscontinuedcomponent

（includinglossondisposalof400,000）*

（520,000）

Incometaxbenefit

208,000

Lossondiscontinuedoperations

（312,000）

Netincome

38,000

Earningspershare:

Incomefromcontinuingoperations

3.50

Lossfromdiscontinuedoperations

（3.12）

Netincome

.38

*Lossondiscontinuedoperations:

Lossonsaleofassets（400,000）

Operatingloss（120,000）

Totalbefore-taxloss（520,000）

Less:

Incometaxbenefit（40%）208,000

Net-of-taxloss（312,000）

Exercise4-6

FIGUROCORPORATION

IncomeStatement

FortheYearEndedDecember31,2006

EUR

Salesrevenue

600,000

Costofgoodssold

320,000

Grossprofit

280,000

Operatingexpenses:

Selling

67,000

Administrative

87,000

Restructuringcosts

55,000

Totaloperatingexpenses

209,000

Operatingincome

71,000

Otherincome（expense）:

Interestanddividends

32,000

Interestexpense

Totalotherincome,net

（26,000）

6,000

Incomebeforeincometaxesandextraordinaryitem

77,000

Incometaxexpense*

30,800

Incomebeforeextraordinaryitem

Extraordinaryitem:

Gainonearlydebtextinguishment（netof34,400

taxexpense）

Netincome

46,200

51,600

97,800

Earningspershare:

Incomebeforeextraordinaryitem

Extraordinarygain

Netincome

.46

.52

0.98

*40%x77,000

Exercise4-7

Requirement1

ESTRELLAENTERPRISES,INC.

PartialIncomeStatement

FortheYearEndedDecember31,2006

EUR

Incomefromcontinuingoperations

400,000

Discontinuedoperations:

Lossfromoperationsofdiscontinuedcomponent

（includingimpairmentlossof50,000）*

（195,000）

Incometaxbenefit

78,000

Lossondiscontinuedoperations

（117,000）

Netincome

283,000

*Lossondiscontinuedoperations:

Operatingloss（145,000）

Impairmentloss（250,000-200,000）（50,000）

Netbefore-taxloss（195,000）

Incometaxbenefit（40%）78,000

Netafter-taxlossondiscontinuedoperations（117,000）

Requirement2

ESTRELLAENTERPRISES,INC.

PartialIncomeStatement

FortheYearEndedDecember31,2006

EUR

Incomefromcontinuingoperations

400,000

Discontinuedoperations:

Lossfromoperationsofdiscontinuedcomponent*

（145,000）

Incometaxbenefit

58,000

Lossondiscontinuedoperations

（87,000）

Netincome

313,000

*Includesonlytheoperatinglossduringtheyear.Thereisnoimpairmentloss.

Exercise4-8

ENRIQUESCOMPANY

PartialIncomeStatement

FortheYearEndedDecember31,2006

EUR

Incomefromcontinuingoperations*

547,200

Discontinuedoperations:

Incomefromoperationsofdiscontinuedcomponent

（includinglossondisposalof350,000）

150,000

Incometaxexpense

60,000

Incomeondiscontinuedoperations

90,000

Netincome

637,200

*Incomefromcontinuingoperations:

Incomebeforeconsideringadditionalitems1,000,000

Decreaseinincomeduetorestructuringcosts（88,000）

Before-taxincomefromcontinuingoperations912,000

Incometaxexpense（40%）（364,800）

Incomefromcontinuingoperations547,200

Exercise4-9

Requirement1

Thisisachangeinaccountingestimate.

Requirement2

Whenanestimateisrevisedasnewinformationcomestolight,accountingforthechangeinestimateisquitestraightforward.Wedonotrestateprioryears'financialstatementstoreflectthenewestimate.Instead,wemerelyincorporatethenewestimateinanyrelatedaccountingdeterminationsfromthereon.Iftheafter-taxincomeeffectofthechangeinestimateismaterial,theeffectonnetincomeandearningspersharemustbedisclosedinanote,alongwiththejustificationforthechange.

Requirement3

850,000Cost

170,000Olda