FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The following selected accounts are taken from the Crandle Corporation's December 31, 2017 adjusted trial balance: Retained earnings, January 1, 2017 Interest Expense Depreciation Expense – Sales Fixtures Sales Returns and Allowances $428,900 4,900 8,500 11,300 14,100 110,000 29,500 Advertising Expense Common Stock, $10 par Administrative and Office Salaries expense Dividend Revenue 900 378,000 7,700 5,000 1,800 6,000 191,200 5,200 1,900 4,600 16,500 10,000 15,870 Sales Property Tax Expense Gain on sale of sales fixtures (pre-tax) Office supplies expense Transportation out - deliveries Cost of goods sold Sales discount taken Bad debt expense Sales supplies expense Sales salaries expense Depreciation expense – buildings and office equipment Income tax expense | In addition to the preceding account balances, you have available the following information: In the middle of December 2017, the company incurred a material $5,500 pretax loss as a result of a freak flood of a river that had never flooded before. While making its December 31, 2017 adjusting entries, the company discovered the following: In records its December 31, 2016 adjusting entries, it had inadvertently recorded depreciation expense twice for the same asset. The amount of the error was $4,000 pretax
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Transcribed Image Text:The following selected accounts are taken from the Crandle Corporation's December 31, 2017 adjusted trial balance: Retained earnings, January 1, 2017 Interest Expense Depreciation Expense – Sales Fixtures Sales Returns and Allowances $428,900 4,900 8,500 11,300 14,100 110,000 29,500 Advertising Expense Common Stock, $10 par Administrative and Office Salaries expense Dividend Revenue 900 378,000 7,700 5,000 1,800 6,000 191,200 5,200 1,900 4,600 16,500 10,000 15,870 Sales Property Tax Expense Gain on sale of sales fixtures (pre-tax) Office supplies expense Transportation out - deliveries Cost of goods sold Sales discount taken Bad debt expense Sales supplies expense Sales salaries expense Depreciation expense – buildings and office equipment Income tax expense | In addition to the preceding account balances, you have available the following information: In the middle of December 2017, the company incurred a material $5,500 pretax loss as a result of a freak flood of a river that had never flooded before. While making its December 31, 2017 adjusting entries, the company discovered the following: In records its December 31, 2016 adjusting entries, it had inadvertently recorded depreciation expense twice for the same asset. The amount of the error was $4,000 pretax
and its considered material. The error did not have any effect upon the depreciation recorded for 2017. Based on an analysis of the company's recent favorable experience with uncollectible accounts receivable, the company decided to reduce the percentage used in computing bad debt expense. The use of the new percentage resulted in the $1,900 bad debt expense being $500 less that the amount that would have been calculated using the old percentage. On April 1, 2017, the company sold Division M, a component of the company, which had been unprofitable for several years. For the first three months of 2017, Division M had incurred a pretax operating loss of $8,800. Division M was sold at a pretax loss of $7,500. The company paid cash dividends of $0.90 on its common stocks. All the stock was outstanding for the entire year. The company is subject to a 30% income tax rate. The $15,870 Income Tax Expense account balance consists of $21,210 tax on income from continuing operations and $1,200 tax on the depreciation correction, and tax credits of $2,640 on the operating loss of Division M, $2,250 on the loss from sale of Division M, and $1,650 on the loss because of the flood. Required: 1. Prepare separate schedules for selling expenses and for general and administrative expenses (include each depreciation expense where applicable in these schedules) 2. Prepare a multiple step income statement for the year ended as of December 31, 2017
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Transcribed Image Text:and its considered material. The error did not have any effect upon the depreciation recorded for 2017. Based on an analysis of the company's recent favorable experience with uncollectible accounts receivable, the company decided to reduce the percentage used in computing bad debt expense. The use of the new percentage resulted in the $1,900 bad debt expense being $500 less that the amount that would have been calculated using the old percentage. On April 1, 2017, the company sold Division M, a component of the company, which had been unprofitable for several years. For the first three months of 2017, Division M had incurred a pretax operating loss of $8,800. Division M was sold at a pretax loss of $7,500. The company paid cash dividends of $0.90 on its common stocks. All the stock was outstanding for the entire year. The company is subject to a 30% income tax rate. The $15,870 Income Tax Expense account balance consists of $21,210 tax on income from continuing operations and $1,200 tax on the depreciation correction, and tax credits of $2,640 on the operating loss of Division M, $2,250 on the loss from sale of Division M, and $1,650 on the loss because of the flood. Required: 1. Prepare separate schedules for selling expenses and for general and administrative expenses (include each depreciation expense where applicable in these schedules) 2. Prepare a multiple step income statement for the year ended as of December 31, 2017
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