Problem 1
Leisure Attire Corporation discontinued Princess Fashions, its whole line of children's clothing, in November of 2001. Prior to the disposal, Princess Fashions prepared a loss of $300,000 (total of tax) for the period from January throughout the sale date. Due to the value of the real estate and machinery, there was a profit of $750,000 (net of tax) on the actual sale. How could this situation be reported in the financial statements of Leisure Attire for 2001?
Answer
A) $450,000 included in the 2001 income statement as an surprising item.
B) $300,000 loss included in income from operations and a $750,000 gain reported in the "discontinued operations" section of the income statement.
C) $450,000 adjustment to starting retained earnings in the statement of retained earnings.
D) $450,000 profit in the "discontinued operations" section of the income statement.
Problem 2
Chelsea Corporation's financial statements for the existing year include the subsequent:
Income from continuing operations $ 520,000
Prior period adjustment (increase in prior year net
Income, net of taxes 90,000
Cash dividents paid to preferred stockholders 102,000
Profit from discontinued operations (net of taxes) 310,000
Collective effect of accounting change (reduction
In total income, net of tax benefit) 220,000
Extraordinary loss (net of tax benefit) 85,000
On the basis of this information, total income for the present year is:
Answer
A) $717,000.
B) $513,000.
C) $965,000.
D) $525,000.
Problem 3:
In the current year 2002, Starlight Corporation suffered a $500,000 loss when its factory was destroyed in a flood. Consider the corporate income tax rate is 32%, what amount can Starlight report as an extraordinary loss on its income statement for 2002? Consider floods are not common in this area.
Answer
A) $500,000
B) $340,000
C) $160,000.
D) Nothing, since this does not qualify as a surprising item.
Problem 4:
On 1st January, 2002, Huga Corporation had 100,000 shares of $5 par value common stock outstanding. On March 31, 2002, Huga issued an additional 8,000 shares in trade for a building. What number of shares can be used in the computation of basic EPS for the year 2002?