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Chapter 4: 3E (page 182)

Presented below are certain account balances of Paczki Products Co.

Rent revenue \(6,500 Sales discounts \)7,800

Interest expense \(12,700 Selling expenses \)99,400

Beginning retained earnings \(114,400 Sales revenue \)390,000

Ending retained earnings \(125,000Income tax expense \)31,000

Dividend revenue \(71,000Cost of goods sold \)184,000

Sales returns and allowances \(12,400Administrative expenses \)82,500

Allocation to non controlling interest $17,000

Instructions

From the foregoing, compute the following: (a) total net revenue, (b) net income, (c) dividends declared, and (d) income attributable to controlling stockholders.

Short Answer

Expert verified

The income attributable to controlling shareholders is $20,300.

Step by step solution

01

Meaning of Dividends

Dividend refers to the amount paid to common shareholders from the profits of a company's earnings. After earning a profit, it is in the hands of the management to either pay dividends or reinvests in the business.

02

Calculation of total net revenue

Computation of Total Net Revenue

Sales Revenue

$390,000

Less: Sales discounts

$7,800

Sales returns and Allowances

$12,400

($20,200)

Net Sales Revenue

$369,800

Dividend Revenue

$71,000

Rent Revenue

$6,500

Total net revenue

$447,300

03

Calculation of Net Income

Calculation of Net Income

Total net revenue (A)

$447,300

Less: Total Operating expenses

Cost of Goods Sold

$184,400

Selling Expenses

$99,400

Administrative Expenses

$82,500

Interest Expenses

$12,700

Total Operating expenses (B)

($379,000)

Income before income tax expense (A-B)

$68,300

Income Tax Expense

($31,000)

Net Income

$37,300

04

Computation of Dividends Declared

Computation of Dividends Declared

Particulars

Amount ($)

Beginning Retained Earnings Balance

$114,400

Add: Net Income

$37,300

$151,700

Less: Ending Retained Earnings Balance

$134,000

Dividends Declared

$17,700

05

Computation of Income attributable to controlling shareholders

Incomeattributabletocontrollingshareholders=Netincome-Allocationtonon-controllinginterest=$37,300-$17,000=$20,300

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Most popular questions from this chapter

Question: At December 31, 2016, Shiga Naoya Corporation had the following stock outstanding.

10% cumulative preferred stock, \(100 par, 107,500 shares \)10,750,000

Common stock, \(5 par, 4,000,000 shares 20,000,000

During 2017, Shiga Naoya did not issue any additional common stock. The following also occurred during 2017.

Income from continuing operations before taxes \)23,650,000

Discontinued operations (loss before taxes) \(3,225,000

Preferred dividends declared \)1,075,000

Common dividends declared $2,200,000

Effective tax rate 35%

Instructions

Compute earnings per share data as it should appear in the 2017 income statement of Shiga Naoya Corporation. (Round to two decimal places.)

Question: What is the major distinction (a) between revenues and gains and (b) between expenses and losses?

Presented below is information related to Viel Company at December 31, 2017, the end of its first year of operations.

Sales revenue \(310,000

Cost of goods sold \)140,000

Selling and administrative expenses \(50,000

Gain on sale of plant assets \)30,000

Unrealized gain on available-for-sale investments \(10,000

Interest expense \)6,000

Loss on discontinued operations \(12,000

Dividends declared and paid \)5,000

Instructions

Compute the following: (a) income from operations, (b) net income, (c) comprehensive income, and (d) retained earnings balance at December 31, 2017. (Ignore income tax effects.)

Bobek Inc. has recently reported steadily increasing income. The company reported income of \(20,000 in 2014, \)25,000 in 2015, and \(30,000 in 2016. A number of market analysts have recommended that investors buy the stock because they expect the steady growth in income to continue. Bobek is approaching the end of its fiscal year in 2017, and it again appears to be a good year. However, it has not yet recorded warranty expense.

Based on prior experience, this year鈥檚 warranty expense should be around \)5,000, but some managers have approached the controller to suggest a larger, more conservative warranty expense should be recorded this year. Income before warranty expense is \(43,000. Specifically, by recording a \)7,000 warranty accrual this year, Bobek could report an increase in income for this year and still be in a position to cover its warranty costs in future years.

Instructions

(a) What is earnings management?

How can information based on past transactions be used to predict future cash flows?
See all solutions

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