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Chapter 4: 7 (page 179)
How can earnings management affect the quality of earnings?
The quality of earnings is negatively affected by earnings management. Earnings management lowers the reliability element of income.
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Which of the following is not reported in an income statement under IFRS?
(a) Discontinued operations.
(b) Extraordinary items.
(c) Cost of goods sold.
(d) Income tax.
(Income Statement, EPS) Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2017.
Cash $50,000
Administrative expenses 100,000
Selling expenses 80,000
Net sales 540,000
Cost of goods sold 210,000
Cash dividends declared (2017) 20,000
Cash dividends paid (2017) 15,000
Discontinued operations (loss before income taxes) 40,000
Depreciation expense, not recorded in 2016 30,000
Retained earnings, December 31, 2016 90,000
Effective tax rate 30%
Instructions
(Multiple-Step and Single-Step Statements) The accountant of Latifa Shoe Co. has piled the following information from the company鈥檚 records as a basis for an income statement for the year ended December 31, 2017.
Rent revenue \(29,000
Interest expense 18,000
Market appreciation on land above cost 31,000
Salaries and wages expense (selling) 114,800
Supplies (selling) 17,600
Income tax 37,400
Salaries and wages expense (administrative) \)135,900
Other administrative expenses 51,700
Cost of goods sold 496,000
Net sales 980,000
Depreciation on plant assets (70% selling, 30% administrative) 65,000
Cash dividends declared 16,000
There were 20,000 shares of common stock outstanding during the year.
Instructions
Presented below are changes in all the account balances of Fritz Mayhew Furniture Co. during the current year, except for retained earnings.
Increase Increase
(Decrease) (Decrease)
Cash \(79,000 Accounts Payable
Accounts Receivable (net) \)45,000 Bonds Payable \(82,000
Inventory \)127,000 Common Stock \(125,000
Investments (47,000) Paid-In Capital in Excess of Par \)13,000
Instructions
Compute the net income for the current year, assuming that there were no entries in the Retained Earnings account except for net income and a dividend declaration of $19,000 which was paid in the current year.
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.
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