ACC 291 Week 2: Practice Questions

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Week 2 Practice Question Solutions EXERCISE 4-8 (15–20 minutes) (a) Net sales $ 540,000 Cost of goods sold (210,000) Administrative expenses (100,000) Selling expenses (80,000) Discontinued operations-loss (40,000) Income before income tax 110,000 Income tax ($110,000 X .30) 33,000 Net income $ 77,000 (b) Income from continuing operations before income tax $150,000* Income tax ($150,000 X .30) 45,000 Income from continuing operations 105,000 Discontinued operations, less applicable income tax of $12,000 (28,000) Net income $ 77,000 *$110,000 + $40,000 Earnings per share: Income from continuing operations…show more content…
Other Expenses and Losses | | | | Interest expense | | | 18,000 | | | | | Income before income tax | | | 323,525 | Income tax | | | 102,000 | Net income | | | $221,525 | Earnings per common share [($221,525 – $9,000) ÷ 80,000] | | | $2.66* | *Rounded TWAIN CORPORATION | Retained Earnings Statement | For the Year Ended June 30, 2014 | Retained earnings, July 1, 2013, as reported | | | $337,000 | Correction of depreciation understatement, net of tax | | | (17,700) | Retained earnings, July 1, 2013, as adjusted | | | 319,300 | Add: Net income | | | 221,525 | | | | 540,825 | Less: | | | | Dividends declared on preferred stock | | $ 9,000 | | Dividends declared on common stock | | 37,000 | 46,000 | Retained earnings, June 30, 2014 | | | $494,825 | PROBLEM 4-4 (Continued) (b) TWAIN CORPORATION | Income Statement | For the Year Ended June 30, 2014 | Revenues | | | Net sales | | $1,485,050 | Dividend revenue | | 38,000 | Total revenues | | 1,523,050 | Expenses | |…show more content…
| Retained Earnings Statement | For the Year Ended December 31, 2014 | Retained earnings, January 1, as reported | $257,600 | Correction of error from prior period (net of tax) | 25,400 | Adjustment for change in accounting principle (net of tax) | (23,200) | Retained earnings, January 1, as adjusted | 259,800 | Add: Net income | 52,300* | Less: Cash dividends declared | 32,000 | Retained earnings, December 31 | $280,100 | *$52,300 = ($84,500 + $41,200 + $21,600 – $35,000 – $60,000)

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