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Chapter 4: Q2Q (page 179)
How can information based on past transactions be used to predict future cash flows?
Past transactions are useful in predicting important trends. It is also helpful in providing information regarding the future performance of cash flows.
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When does tax allocation within a period become necessary? How should this allocation be handled?
Presented below is information related to Viel Company on 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 non-trading equity securities 10,000
Interest expense 6,000
Loss on discontinued operations 12,000
Allocation to non-controlling interest 40,000
Dividends declared and paid 5,000
Instructions
Compute the following: (a) income from operations, (b) net income, (c) net income attributable to Viel Company controlling shareholders, (d) comprehensive income, and (e) retained earnings balance on December 31, 2017. (Ignore income taxes.)
Stacy Corporation had income from operations of \(7,200,000. In addition, it suffered an unusual and infrequent pretax loss of \)770,000 from a volcano eruption, interest revenue of \(17,000, and a write-down on buildings of \)53,000. The corporation's tax rate is 30%. Prepare a partial income statement for Stacy beginning with income from operations. The corporation had 5,000,000 shares of common stock outstanding during 2017.
(Single-Step Statement, Retained Earnings Statement, Periodic Inventory) Presented below is the trial balance of Thompson Corporation on December 31, 2017.
| THOMPSON CORPORATION | ||
| TRIAL BALANCE | ||
| DECEMBER 31, 2017 | ||
Debit (\() | Credit (\)) | |
Purchase Discounts | \(10,000 | |
Cash | \)189,700 | |
Accounts receivables | 105,000 | |
Rent Revenue | 18,000 | |
Retained Earnings | 160,000 | |
Salaries and Wages payable | 18,000 | |
Sales Revenue | 1,100,000 | |
Notes Receivables | 110,000 | |
Accounts payable | 49,000 | |
Accumulated Depreciation | 28,000 | |
Sales discount | 14,500 | |
Sales return and allowances | 17,500 | |
Notes payable | 70,000 | |
Selling expenses | 232,000 | |
Administrative expenses | 99,000 | |
Common Stock | 300,000 | |
Income tax expenses | 53,900 | |
Cash Dividends | 45,000 | |
Allowance for Doubtful Accounts | 5,000 | |
Supplies | 14,000 | |
Freight-In | 20,000 | |
Land | 70,000 | |
Equipment | 140,000 | |
Bonds Payable | 100,000 | |
Gain on Sale of Land | 30,000 | |
Accumulated Depreciation | 19,600 | |
Inventory | 89,000 | |
Buildings | 98,000 | |
Purchases | 610,000 | |
Totals | \(1,907,600 | \)1,907,600 |
A physical count of inventory on December 31 resulted in an inventory amount of \(64,000; thus, cost of goods sold for 2017 is \)645,000.
Instructions
Prepare a single-step income statement and a retained earnings statement. Assume that the only changes in retained earnings during the current year were from net income and dividends. Thirty thousand shares of common stock were outstanding the entire year.
(Multiple-Step Statement) The following balances were taken from the books of Alonzo Corp. on December 31, 2017.
Interest revenue \(86,000 Accumulated depreciation equipment \)40,000
Cash \(51,000 Accumulated depreciation鈥攂uildings \)28,000
Sales revenue \(1,380,000 Notes receivable \)155,000
Accounts receivable \(150,000 Selling expenses \)194,000
Prepaid insurance \(20,000 Accounts payable \)170,000
Sales returns and allowances \(150,000 Bonds payable \)100,000
Allowance for doubtful accounts \(7,000 Administrative and general expense \)97,000
Sales discounts \(45,000 Accrued liabilities \)32,000
Land \(100,000 Interest expense \)60,000
Equipment \(200,000 Notes payable \)100,000
Buildings \(140,000 Loss from earthquake damage \)150,000
Cost of goods sold \(621,000 Common stock \)500,000
Retained earnings $21,000
Assume the total effective tax rate on all items is 34%.
Instructions
Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year.
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