FinancialReportingandAnalysis财务报告与分析smch04.docx

1、FinancialReportingandAnalysis财务报告与分析smch04Financial Reporting and Analysis财务报告与分析-sm_ch04Chapter 4 Income Statement TO THE NET 1. a. $19,400,000 Equity earnings (losses) are the investors proportionate share of the investees earnings (losses). b. $20,100,000 If a firm consolidate subsidiaries not wh

2、olly owned, the total revenues and expenses of the subsidiaries are included with those of the parent. However, to determine the income that would accrue to the parent, it is necessary to deduct the portion of income that would belong to the minority shares. 2. a. Net Sales $3,122,433,000 (2001) $2,

3、761,983,000 (2000) $1,639,839,000 (1999) b. Loss from Operations $412,257,000 (2001) $863,880,000 (2000) $605,755,000 (1999) c. Interest Expense $139,232,000 (2001) $130,921,000 (2000) $ 84,566,000 (1999) d. Material increase in sales, but this has not resulted in operating profits. In addition to t

4、he operating losses there has been material interest expense. 68 QUESTIONS 4- 1. Extraordinary items are events or transactions that are distinguished by their unusual nature and infrequency of occurrence. They might include casualty losses or losses from expropriation or prohibition. They must be s

5、hown separately, net of tax, in order that trend analysis can be made of income before extraordinary items. 4- 2. d, f 4- 3. Examples include sales of securities, write-down of inventories, disposal of a product line not qualifying as a segment, gain or loss from a lawsuit, etc. They are shown separ

6、ately because of their materiality and the desire to achieve full disclosure. They are not given net-of-tax treatment because they are included in income before the income tax is deducted. Also, net-of-tax treatment would infer that these items are extraordinary. 4- 4. Under the equity method, equit

7、y in earnings of nonconsolidated subsidiaries is a problem in profitability analysis because the income recognized is not a cash inflow. The cash inflow is only the amount of the investor share of dividends declared and paid. Further, equity earnings do not come directly from the operations of the b

8、usiness in question, but rather from a subsidiary. 4- 5. It would appear that this is the disposal of a product line that is specifically separate from the dairy products line. The disposal of the vitamin line should be identified as discontinued operations and be presented after income from continu

9、ing operations on the income statement. 4- 6. Unusual or infrequent items relate to operations. Examples are write-downs of receivables and write-downs of inventory. 4- 7. In 2000, the cumulative effect of the new change would be presented on the income statement as a reduction, net of tax, after an

10、y extraordinary items and just before net income. 69 4- 8. The declaration of a cash dividend reduces retained earnings and increases current liabilities. The payment of a cash dividend reduces current liabilities and cash. 4- 9. First, a stock split is usually for a larger number of shares. Secondl

11、y, a stock dividend reduces retained earnings and increases paid-in capital. A stock split merely increases the shares and reduces the par value, leaving the capital stock account intact. Both require restatement of any per share items. 4-10. If a firm consolidates subsidiaries that are not wholly o

12、wned, the total revenues and expenses of the subsidiaries are included with those of the parent. To determine the income that would accrue to the parent, however, it is necessary to deduct the portion of income that would belong to the minority owners. 4-11. The statement of retained earnings summar

13、izes the changes to retained earnings. Retained earnings represents the undistributed earnings of the corporation. The income statement net income is added to retained earnings. A loss is deducted from retained earnings. 4-12. 1. Appropriations as a result of a legal requirement. 2. Appropriations a

14、s a result of a contractual agreement. 3. Appropriations as a result of management discretion. Appropriations as a result of management discretion are not likely a detriment to the payment of a dividend. 4-13. The balance sheet shows the account balances as of a particular point in time. The income

15、statement shows the revenues and expenses resulting from transactions for the period of time. 4-14. a. Minority share of earnings is an income statement item that represents the minority owners share of consolidated earnings. b. Equity in earnings is the proportionate share of the earnings of the in

16、vestor that relate to the investors investment. 70 4-15. The two traditional formats for presenting the income statement are the multiple-step and single-step. The multiple-step is preferable for analysis because it provides intermediate profit figures that are useful in analysis. 2003 2002 2001 4-1

17、6. Earnings per share $1.40 $1.00 $.80 4-17. Accountants have not accepted the role of disclosing the firms capacity to make distributions to stockholders. Therefore, the firms capacity to make distributions to stockholders cannot be determined using published financial statements. 4-18. Management

18、does not usually like to tie comprehensive income closely with the income statement because the items within accumulated other comprehensive income have the potential to be volatile. 71 PROBLEMS PROBLEM 4-1 a. Decher Automotives Income Statement For the Year Ended December 31, 2003 Sales $1,000,000

19、Cost of sales Beginning inventory $ 650,000 Purchases 460,000 Merchandise available for sale $1,110,000 Less: Ending inventory 440,000 Cost of sales 670,000 Gross profit 330,000 Operating expense: Selling expenses $ 43,000 Administrative expenses 62,000 105,000Operating income 225,000 Other income:

20、Dividend income 10,000 235,000 Other expense: Interest expense 20,000 Income before taxes and extraordinary items 215,000 Income taxes 100,000 Income before extraordinary items 115,000 Extraordinary items: flood loss, net of tax (30,000) Net income $ 85,000 b. Earnings per share: Before extraordinar

21、y items $ 1.15 Extraordinary items (loss) (.30) Net income $ .85 72 c. Decher Automotives Income Statement For the Year Ended December 31, 2003 Revenue: Sales $1,000,000 Other income 10,000 Total revenue 1,010,000 Expenses: Cost of sales $670,000 Operating expenses 105,000 Interest expense 20,000 79

22、5,000 Income before taxes and extraordinary items 215,000 Income taxes 100,000 Income before extraordinary items 115,000 Extraordinary items, flood loss, net of tax 30,000 Net income $85,000 PROBLEM 4-2 Lesky Corporation Income Statement For the Year Ended December 31, 2003 Revenue from sales $362,0

23、00 Cost of products sold 242,000 Gross profit 120,000 Operating expenses: Selling expenses $47,000 Administrative and general expenses 11,400 58,400 Operating income 61,600 Other items: Other income: Rental income $1,000 Interest income 2,400 3,400 Other expense: Interest expense (2,200) Income befo

24、re tax 62,800 Federal and state income taxes 20,300 Net income $42,500 73 PROBLEM 4-3 CONSOLIDATED CAN Income Statement For the Year Ended December 31, 2003 Sales $480,000 Cost of products sold 410,000 Gross profit 70,000 Selling and administrative expenses 42,000 Operating income 28,000 Other incom

25、e 1,600 29,600 Interest expense 8,700 Income before tax and extraordinary items 20,900 Income tax 9,300 Income before extraordinary items 11,600 Extraordinary gain, net of tax 1,000 Net income 12,600 Retained earnings 1/1 270,000 282,600 Less: dividends 3,000 Retained earnings $279,600 PROBLEM 4-4 a

26、. Taperline Corporation Income Statement For the Year Ended December 31, 2003 Revenues: Sales $670,000 Rental income 3,600 Gain on the sale of fixed assets 3,000 Total revenues 676,600 Expenses: Cost of sales $300,000 Selling expenses 97,000 General and administrative expenses 110,000 Depreciation 1

27、0,000 Interest expense 1,900 518,900 Income before extraordinary items and taxes on income 157,700 Income tax 63,080 Earnings before extraordinary item 94,620 Casualty loss $ 30,000 Less: Tax saving 12,000 18,000 Net income $ 76,620 74 Earnings per share on common stock: (30,000 shares outstanding)

28、Income before extraordinary items $3.15 Net income $2.55 b. Taperline Corporation Income Statement For the Year Ended December 31, 2003 Sales $670,000 Cost of sales 300,000 Gross profit 370,000 Operating expenses Selling expenses $ 97,000 General and administrative expenses 110,000 Depreciation 10,0

29、00 217,000 Operating income 153,000 Other revenue: Rental income $ 3,600 Gain on the sale of fixed assets 3,000 6,600 159,600 Other expenses: Interest expense 1,900 Income before extraordinary items and taxes on income 157,700 Income tax 63,080 Income before extraordinary item 94,620 Casualty loss $

30、 30,000 Less: Tax saving 12,000 18,000 Net income $ 76,620 Earnings per share on common stock: (30,000 shares outstanding) Income before extraordinary items $3.15 Net income $2.55 75 PROBLEM 4-5 Tax Rate = Taxes . = $20,000 = 50% Income Before $40,000 Taxes Provision for unusual write-offs $50,000 L

31、ess: tax effects (50% x $50,000) 25,000 Net item $25,000 Extraordinary charge, net of tax of $10,000 $50,000 Net earnings (loss) (30,000) Net earnings with nonrecurring items removed ($30,000)+$25,000+$50,000 $45,000 PROBLEM 4-6 Sales $4,000,000 Cost of sales 2,000,000 Gross profit 2,000,000 Operating expenses: 1 Administrative expenses $40i.000 2 Selling expense 600,000 1,000,000 Operating income 1,000,000 3 Interest expe