Learning Materials
Features
Discover
Chapter 4: 2 (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.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Roxanne Carter Corporation reported the following for 2017: net sales \(1,200,000, cost of goods sold \)750,000, selling and administrative expenses \(320,000, and an unrealized holding gain on available-for-sale securities \)18,000.
Instructions
Prepare a statement of comprehensive income, using (a) the one statement format and (b) the two statement format. (Ignore income taxes and earnings per share.)
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.
Linus Paper Company decided to close two small pulp mills in Conway, New Hampshire, and Corvallis, Oregon. These two closings do not represent a major shift in strategy for the company. Would these closings be reported in a separate section entitled “Discontinued operations after income from continuing operations”? Discuss.
The following financial statement was prepared by employees of Walters Corporation.
WALTERS CORPORATION
INCOME STATEMENT
THE YEAR ENDED DECEMBER 31, 2017
Revenues
Gross sales, including sales taxes \(1,044,300
Less: Returns, allowances, and cash discounts 56,200
Net sales 988,100
Dividends, interest, and purchase discounts 30,250
Recoveries of accounts written off in prior years 13,850
Total revenues 1,032,200
Costs and expenses
Cost of goods sold, including sales taxes 465,900
Salaries and related payroll expenses 60,500
Rent 19,100
Delivery expense and freight in 3,400
Bad debt expense 27,800
Total costs and expenses 576,700
Income before other items 455,500
Other items
Loss on discontinued styles (Note 1) 71,500
Loss on sale of marketable securities (Note 2) 39,050
Loss on sale of warehouse (Note 3) 86,350
Total other items 196,900
Net income \)258,600
Net income per share of common stock \(2.30
Note 1: New styles and rapidly changing consumer preferences resulted in a \)71,500 loss on the disposal of discontinued styles and related accessories.
Note 2: The Corporation sold an investment in marketable securities at a loss of \(39,050. The corporation normally sells securities of this nature.
Note 3: The Corporation sold one of its warehouses at an \)86,350 loss.
Instructions
Identify and discuss the weaknesses in classification and disclosure in the single-step income statement above. You should explain why these treatments are weaknesses and what the proper presentation of the items would be in accordance with GAAP.
During 2017, Liselotte Company reported income of \(1,500,000 before income taxes and realized a gain of \)450,000 on the disposal of assets related to a discontinued operation. The criteria for classification as a discontinued operation is appropriate for this sale. The income is subject to income taxation at the rate of 34%. The gain on the sale of the plant is taxed at 30%. Indicate an appropriate presentation of these items in the income statement.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App