According to the IASB Framework, what is the financial statement element that is defined as increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants?
1. The Barr Company had the following items from their 2015 income statement:
Revenue $725,000
Income tax expense 33,565
Cost of goods sold 443,056
Other operating expenses 13,425
Salaries and wages expense 161,110
Unrealized gain on value of investments 26,852
Weighted average number of shares 140,000
Required: Prepare a single-step income statement for 2015.
| Revenue |
725000 |
| Less: Cost of goods sold |
443056 |
| Gross profit |
281944 |
| Salaries and wages expense |
161110 |
| Income from operations |
120834 |
| Unrealized gain on value and investment |
26852 |
|
147686 |
| Less: Other operating expenses |
13425 |
| Earnings before income tax |
134261 |
| Income tax |
33565 |
| Net income |
100696 |
Question 2 . The following is a listing of accounts for Semper Company for the year ending December 31, 2015:
Cash $ 65,000
Cost of goods sold 235,000
Administrative expenses 145,000
Cash dividends declared 32,000
Cash dividends paid 27,500
Selling expenses 97,250
Discontinued operations loss
(before income taxes) (52,250)
Net sales 604,280
Depreciation expense that was
Not recorded in 2013 42,500
Retained earnings, December 31, 2014 105,000
Tax rate 33%
Required: Compute net income for 2015
| Retained earnings, Jan. 1, as reported |
|
$105,000.00 |
| Correction for overstatement of net income in prior period (depreciation error) |
|
$42,500.00 |
| Retained earnings, Jan. 1, as adjusted |
|
$62,500.00 |
| Add: Net income |
|
$50,102.60 |
|
|
$112,602.60 |
| Less: Dividends declared |
|
$32,000.00 |
| Retained earnings, Dec. 31 |
|
$80,602.60 |
|
|
|
| Net sales |
|
$604,280.00 |
| Less: cost of goods sold |
|
$235,000.00 |
| Gross profit |
|
$369,280.00 |
| Expenses |
|
|
| Selling expenses |
$97,250.00 |
|
| Administrative expenses |
$145,000.00 |
$242,250.00 |
| Income before income tax |
|
$127,030.00 |
| Income tax |
|
$41,919.90 |
| Income from continuing operations |
|
$85,110.10 |
| Discontinued operations |
|
|
| Loss on discontinued operations |
$52,250.00 |
|
| Less: Applicable income tax reduction |
$17,242.50 |
$35,007.50 |
| Net Income |
|
$50,102.60 |
Question 3. The beginning merchandise inventory was overstated $10,000 in 2014, purchases were understated $7,000 in 2014 and the ending merchandise inventory was understated $12,000 in 2015. Assume that no corrections were made during 2014 or 2015. All other items in the income statement were correct.
1) What affect does this have on the cost of goods sold and net income for 2014 in dollars understated or overstated?
2) What affect does this have on net income and retained earnings in dollars understated or overstated for 2015?
Question 4. On December 1, 2015, Green Co. committed to a plan to dispose of its Smart business component's assets. The disposal meets the requirements to be classified as discontinued operations. On that date, Green estimated that the loss from the disposition of the assets would be $1,500,000 and Smart's 2015 operating losses were $475,000. Disregarding income taxes, what net gain (loss) should be reported for discontinued operations in Green's 2015 income statement?