Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 4: Question 26Q (page 180)

Qualls Corporation reported 2017 earnings per share of \(7.21. In 2018, Qualls reported earnings per share as follows.

On income from continuing operations \)6.40

On discontinued operations \(1.88

On net income \)8.28

Is the increase in earnings per share from \(7.21 to \)8.28 a favorable trend?

Short Answer

Expert verified

No, the increased earnings per share is not a favorable trend in the case of Qualls Corporation.

Step by step solution

01

Meaning of Business Operations

The term business operation refers to the group of activities that a business entity performs during a year. The operations of a business are bifurcated into two major categories- continued and discontinued operations.

02

Trend of computing earnings per share

According to the given scenario, the trend of computing earnings per share is not favorable because discontinued operations’earnings per share are not included in the EPS computation.

It may lead to manipulations in the financial statements as earnings per share would present increased amounts.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

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

Identify at least two situations in which important changes in value are not reported in the income statement.

The financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2017. Fortunately, the controller had kept certain statistical data related to the income statement as follows.XXX

  1. The beginning merchandise inventory was \(92,000 and decreased 20% during the current year.
  2. Sales discounts amount to \)17,000.
  3. 20,000 shares of common stock were outstanding for the entire year.
  4. Interest expense was \(20,000.
  5. The income tax rate is 30%.
  6. The cost of goods sold amounts to \)500,000.
  7. Administrative expenses are 20% of the cost of goods sold but only 8% of gross sales.
  8. Four-fifths of the operating expenses relate to sales activities.

Instructions

From the foregoing information prepare an income statement for the year 2017 in single-step form.

The financial statements of P&G are presented in Appendix B. The company’s complete annual report, including the notes to the financial statements, is available online.

Instructions

Refer to P&G’s financial statements and the accompanying notes to answer the following questions.

(a) What type of income statement format does P&G use? Indicate why this format might be used to present income statement information.

(b) What are P&G’s primary revenue sources?

(c) Compute P&G’s gross profit for each of the years 2012–2014. Explain why gross profit decreased in 2014.

(d) Why does P&G make a distinction between operating and nonoperating revenue?

(e) What financial ratios did P&G choose to report in its “Financial Summary” section covering the years 2009–2014?

Indicate where the following items would ordinarily appear on the financial statements of Boleyn, Inc. for the year 2017.

(a) The service life of certain equipment was changed from 8 to 5 years. If a 5-year life had been used previously, additional depreciation of \(425,000 would have been charged.

(b) In 2017, a flood destroyed a warehouse that had a book value of \)1,600,000. Floods are rare in this locality.

(c) In 2017, the company wrote off $1,000,000 of inventory that was considered obsolete.

(d) In 2014, a supply warehouse with an expected useful life of 7 years was erroneously expensed.

(e) Boleyn, Inc. changed from weighted-average to FIFO inventory pricing.
See all solutions

Recommended explanations on Business Studies Textbooks

Influences On Business

Read Explanation

Intermediate Accounting

Read Explanation

Introduction to Business

Read Explanation

Change Management

Read Explanation

Strategic Direction

Read Explanation

Business Case Studies

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free