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Chapter 4: 22Q (page 180)

Discuss the appropriate treatment in the income statement for the following items:

(a) Loss on discontinued operations.

(b) Non-controlling interest allocation.

(c) Earnings per share.

(d) Gain on sale of equipment.

Short Answer

Expert verified

a) Reported between income from continuing operations and net income

b) Reported after the net income

c) Reported after the non-controlling interest allocation

d) Reported in other revenues and gains section

Step by step solution

01

Meaning of Income Statement

An Income statement includes four main items: revenue, gains, expenses, and losses. It is considered one of the three main financial statements.

02

Explanation of Loss on discontinued operations

A loss on discontinued operations is reported in the income statement as net of tax between income from continuing operations and net income.

03

Explanation of Non-controlling interest allocation

Non-Controlling interest allocation is reported in the income statement after the net income.

04

Explanation of Earnings per share

Earnings per share are reported in the income statement after the non-controlling interest allocation.

05

Explanation of Gain on sale of equipment

A gain on the sale of equipment is reported in the other revenues and gains in the income statement.

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Most popular questions from this chapter

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 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.)

What effect does intraperiod tax allocation have on reported net income?

Neumann Company computed earnings per share as follows.

Net income

_____________________________________

Common shares outstanding at year-end

Neumann has a simple capital structure. What possible errors might the company have made in the computation? Explain.

Tim Mattke Company began operations in 2015 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2017, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below.

Year Weighted Average FIFO

2015 \(370,000 \)395,000

2016 390,000 \(430,000

2017 410,000 \)450,000

Instructions

  1. What is Mattke’s net income in 2017? Assume a 35% tax rate in all years.
  2. Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing.

Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2017 income statement.
See all solutions

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