Exam 3: Statements of Income and Comprehensive Income

Ace Corporation decided to sell its medical supplies business segment for $500,000, on September 1, Year 1. The disposal date is November 1, Year 1. The book value of the segment's net assets is $650,000. The pre-tax income for the segment for the period January 1 - September 1, Year 1, was a loss of $90,000; the pre-tax income for the segment for September and October was a loss of $20,000. Assuming a tax rate of 40%, choose the correct reporting for discontinued operations in the income statement of Ace Corporation, for the year ended December 31, Year 1. Income (loss) from Discontinued operations Gain (loss) from disposal of discontinued operations 1 (\ 90,000) (\ 170,000) 2 \ 0 \ \ 144,000) 3 (\ 66,000) (\ 90,000) 4 (\ 54,000) \ \ 102,000)

IFRS 5 defines a discontinued operation as an operating segment of a company that:

Scents 4 Cents Ltd. made the following changes to its retained earnings account during the year: Created $40,000 of new appropriations Reversed $50,000 of previous year's appropriations Declared $30,000 of dividends to its shareholders Paid $70,000 of dividends to its shareholders Earned $30,000 after income taxes By what amount did the firm's total retained earnings change for the year?

A company reported the following results of its operations for 2006: Loss trom discontinued operations (pre-tas) \ 9,000 Net income (atter tax) 32,600 ncome tax rate 40\% Income from continuing operations was:

On January 1, 1999, a company purchased a machine that cost $12,000. It was depreciated for 1999, 2000, and 2001, using the straight-line method, on the basis of a 5 year estimated useful life and no residual value. During early 2002, the estimated total useful life was changed to 7 years with an $800 residual value at the end of year 7. (a) Give any entry required during 2002 to reflect the change (if none explain why). (b) Give the adjusting entry required on December 31, 2002.

Gross billings for merchandise sold by Stratford Co. to its customers last year amounted to $19,650,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for Orio Company were:

Only non-current assets may be reclassified as Assets Held for Sale.

At the end of 2008, and before any adjusting entries were made, a company discovered that a tract of land (used as a parking lot next to the newly completed office building) that had been purchased for $20,000 cash on January 1, 2005, was debited in full to the office building account on that date. The building was being depreciated over a 20-year life with no residual value (straight-line). Assume a 25 percent tax rate. (a) Correct all of the accounts (omit income tax effect). (b) Record the income tax effects (assume income tax for 2008 has not yet been paid).

Intraperiod income tax allocation:

Under IFRS, the parent company's share of any profits or losses arising from joint ventures must be included on the face of Statement of Comprehensive Income.

A company owns an operational asset acquired on January 1, 2006 at a cost of $10,000. It had an estimated useful life of 5 years, no residual value, and was being depreciated on a straight-line basis. On December 31, 2007, it was determined that the total useful life would be 4 years. The following adjusting entry (assuming no adjusting entries have been made) for the accounting year ended December 31, 2007 should be made (rounded to the nearest dollar): 1 Depreciation expense 2,667 Accumulated depreciation 2,667 2 Depreciation expense 2,000 Accumulated depreciation 2,000 3 Retained Earnings 500 Accumulated depreciation 500 4 Retained Earnings 667 Accumulated depreciation 667

When a firm decided to change its method of depreciation from the straight-line method to an accelerated method, in Year 8, it discovered that the effect of the change on total depreciation expense for all years affected was as follows. For all years prior to year 8, the depreciation was $50,000 in total. For year 8 only, the depreciation increased by $11,000. Ignoring taxes, Year 8 income is decreased by what amount, and in what classification, as a result of the accounting change? Income from continuing operations Net income 1 \ 11,000 \ 0 2 \ 11,000 \ 11,000 3 \ 61,000 \ 0 4 \ 0 \ 51,000

Once any unrealized gains or losses included in Other Comprehensive Income are realized, they are transferred to the income statement.

A company sold a used operational asset at a $20,000 loss. The loss should be classified on the income statement as:

A company which lost part of its accounting system in a fire is having trouble determining what its net income is for the current year. The following correct adjusted balances and additional information for the current year are available: Balances at Jan. 1 Balances at DeC. 31 Total as sets \ 10,000 \ 27,000 Total liabilities 3,000 8,000 Additional information for the year: Stock dividend declared and distributed: \ 5,000 Correction of prior years' error (cr.): 2,000 Cash dividends declared and distributed: 7,000 Other than earnings and the events listed above, no other events or transactions affected owners' Equity in the current year. What was net income for the current year?

Sierra Inc. committed to sell its mountaineering division for $700,000 on October 1, Year 1. The book value of the division's net assets was $800,000. The disposal date is expected to be April 1, Year 2. Year 1 income of the division to October 1, Year 1 was a $30,000 loss, and income for the remainder of the year was a $10,000 loss. Sierra estimates that the division will lose another $25,000 during the remainder of the phase-out period in Year 2. Ignoring taxes choose the correct reporting for discontinued operations in the income statement of Sierra, Inc., for the year ended December 31, Year 1. Income (loss) from Discontinued operations Gain (loss) from disposal of discontinued operations 1 \ 0 (\ 165,000) 2 (\ 165,000) \ 0 3 (\ 30,000) \ \ 135,000) 4 (\ 65,000) \ \ 100,000)

Accounting income is a less complete measurement of wealth than is economic income.

A company provides residential carpet cleaning at a rate of $24 per month or $250 per year if paid one year in advance. Examination of the bank deposits revealed the following: Cash collected from customers during the year (including advances) \ 16,000 Advances from customers 1/1 2,000 Advances from customers 12/31 2,600 Accounts receivable 1/1 10,400 Accounts receivable 12/31 9,600 Revenue for the year was $__________________.

Under IFRS, a discontinued operation must be a:

Economic income excludes accounting income.