Vous êtes sur la page 1sur 8

E4-6: During 2007 Lebron James Company changed from FIFO to weighted-average inventory pricing.

Pretax income in 2006 and 2005 (James's first year of operations) under FIFO was $160,000 and $180,000, respectively. Pretax income using weighted-average pricing in the prior years would have been $145,000 in 2006 and $170,000 in 2005. In 2007, Lebron James Company reported pretax income (using weighted-average pricing) of $190,000. Show comparative income statements for Lebron James Company, beginning with Income before income tax, as presented on the 2007 income statement. (The tax rate in all years is 30%.)

Lebanon James Company Comparative Income Statement 2007 1900 00 5700 0 1330 00 2006 1450 00 4350 0 1015 00 2005 1700 00 5100 0 1190 00

Pretax income Tax (30%) Income after Tax

E4-16: (Various Reporting Formats) The following information was taken from the records of Roland Carlson Inc. for the year 2007. Income tax applicable to income from continuing operations $187,000; income tax applicable to loss on discontinued operations $25,500; income tax applicable to extraordinary gain $32,300; income tax applicable to extraordinary loss $20,400; and unrealized holding gain on available-for-sale securities $15,000. Extraordinary gain Loss on discontinued operations Administrative expenses Rent revenue Extraordinary loss $ 95,000 5,000 240,000 40,000 60,000 Cash dividends declared Retained earnings January 1, 2007 Cost of goods sold Selling expenses Sales $ 150,000 600,000 850,000 300,000 1,900,000

Shares outstanding during 2007 were 100,000.

Instructions 1. Prepare a single-step income statement for 2007.

Lebanon James Company Income Statement Particular Revenues: Sales Rent Revenue Unrealized Gain salable securities Extra ordinary gain Total Expenses and Gains Selling Exp Cost of Goods Sold Extra ordinary loss Administrative Expenses Loss on discontinued operation Income Tax Total 30000 0 85000 0 60000 24000 0 75000 17340 0 16984 00 35160 0 19000 00 40000 15000 95000 20500 00 Amoun t

Profit

The calculation of tax is as here under

Calculation of total tax Continuing operation discontinued operation

18700 0 25500

extraordinary gain extraordinary loss Total

32300 20400 17340 0

2.

Prepare a retained earnings statement for 2007.

Lebanon James Company Statement of Retained Earnings Opening Retained Earnings 600000 Add: Profit after tax 351600 Less: Declared Cash dividends 150000 Retained earnings balance 801600

3. Show how comprehensive income is reported using the second income statement format.

Lebanon James Company Income Statement Particular Amoun t

Sales Less: Cost of goods sold Gross Profit on sales Less: Selling and administrative expenses Selling Exp Administrative Expenses Income from operation Other Revenues and Gains Rent Revenue Unrealized Gain salable securities Extra ordinary gain Other Expenses and losses Extra ordinary loss Loss on discontinued operation Income before income tax Income tax Income after tax Earnings per share

19000 00 85000 0 10500 00 10500 00

30000 0 24000 0

54000 0 51000 0

40000 15000 95000 15000 0

60000 75000 17340 0 35160 0 3.52 13500 0 52500 0

E18-4: (Recognition of Profit on Long-Term Contracts) During 2007 Pierson Company started a construction job with a contract price of $1,500,000. The job was completed in 2009. The following information is available.

2007 Costs incurred to date Estimated costs to complete $400,000 600,000

2008 $935,000 165,000

2009 $1,070,000 0

2007 Billings to date Collections to date 300,000 270,000

2008 900,000 810,000

2009 1,500,000 1,425,000

Instructions 1. Compute the amount of gross profit to be recognized each year assuming the percentage-ofcompletion method is used. 2007 2008 2009 Costs incurred to date $400,000 $935,000 $1,070,000 Cost recognized till last $400,000 $935,000 year Cost recognized in year 400,00 535,00

0
Estimated costs to complete Percentage completed Revenue to be recognized to date Revenue recognized till last year Revenue recognized in year 600,000 40.00% 600,000

0
165,000 85.00% 1,275,000 600,000

135,000
0 100.00% 1,500,000 1,275,000

Gross profit in the year


2. For Costs incurred Costs Dr 535000 Cr Cash 535000

600,00 0 $200,0 00

675,00 0 $140,0 00

225,000 $90,000

Prepare all necessary journal entries for 2008.

For Billing

Accounts receivable Dr

600000

Cr Unbilled revenues (2007) 300000 Cr Sales 300000

For Recognizing Revenue Unbilled Revenues Dr Cr Sales 375000 375000

For collection Cash Dr. 540000

Cr Accounts receivable 540000

3. Compute the amount of gross profit to be recognized each year assuming the completed-contract method is used.

Under Completed contract method, no gains would be realized in initial 2 years, the whole revenue of $ 1500000 would be recognized in 3rd year 1.e. 2009. The profit would also be recognized in 2009 and that would be (1500000-1070000) = $430000 E18-5: (Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Beth Botsford uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2007, follow. Balance Sheet Accounts receivableconstruction contract billings Construction in progress Less: Contract billings Cost of uncompleted contract in excess of billings $65,000 61,500 3,500 $21,500

Income Statement Income (before tax) on the contract recognized in 2007 $18,200

Instructions

1.

How much cash was collected in 2007 on this contract?

Contract billings Accounts receivable Cash collected

$61500 21500 $40000

2.

What was the initial estimated total income before tax on this contract?

Assuming no escalation in cost- Total income on project is @ 21.88% (18200/(65000+18200) So total income = 21.88% of 1000000 = $ 218,800

Vous aimerez peut-être aussi