Connect Access Card for Financial Accounting
9th Edition
ISBN: 9781259738678
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 1, Problem 1.4CP
Using Financial Reports: Identifying and Correcting Deficiencies in an Income Statement and
Performance Corporation was organized on January 1, 2015. At the end of 2015, the company had not yet completed an accountant: however, an employee who was “good with numbers” prepared the following statements at that date:
| PERFORMANCE CORPORATION December 31,2015 | |
| Income from sales of merchandise | $180,000 |
| Total amount paid for goods sold during 2015 | (90,000) |
| Selling costs | (25,000) |
| Depreciation (on service vehicles used) | (12,000) |
| Income from services rendered | 52,000 |
| Salaries and wages paid | (62,000) |
| PERFORMANCE CORPORATION December 31,2015 | ||
| Resources | ||
| Cash | $32,000 | |
| Merchandise inventory (held for resale) | 42,000 | |
| Service vehicles | 50,000 | |
| 32,250 | ||
| Grand total | $156,250 | |
| Debts | ||
| Payables to suppliers | $ 17,750 | |
| Note owed to bank | 25,000 | |
| Due from customers | 13,000 | |
| Total | $55,750 | |
| Supplies on hand (to be used in rendering services) | $15,000 | |
| Accumulated depreciation* (on service vehicles) | 12,000 | |
| Common stock, 6,500 shares | 65,000 | |
| Total | 92,000 | |
| Grand total | $147,750 | |
| *This represents the portion of the service vehicles that has been used up to date. | ||
Required:
- 1. List all deficiencies that you can identify in these statements. Give a brief explanation of each one.
- 2. Prepare a proper income statement (correct net income is $32,250 and income tax expense $10,750) and balance sheet (correct total assets are $140,000).
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The following information was developed from the financial statements of Free Time, Inc. At the beginning of 2018, the company's former supplier went bankrupt, and the company began buying merchandise from another supplier.
2018 2017
Gross profit on sales $720,000 $800,000
Income before income tax 200,000 220,000
Net Income 150,000 170,000
Net income as a percentage of net sales 8% 10%
a. Compute the net sales for each year
b. Compute the cost of goods sold in dollars and as a percentage of net sales each year.
c. Compute operating expenses in dollars and as a percentage of net sales for each year. (Income taxes expense is not an operating expense.)
d. Prepare a condensed comparative income statement for 2014 and 2015. Include the following…
Shown below is an income statement for 2015 that was prepared by a poorly trained bookkeeper of Howell Corporation.
Howell Corporation
INCOME STATEMENT
31-Dec-15
Sales revenue ???
sales discount 2,500
sales returns and allowances 6,200
net sales ???
Interest revenue 19,500
beginning inventory 500,000
purchases ???
ending inventory 356,500
Cost of goods sold 75% beginning inventory
Selling expenses 145,000
Administrative expense 215,000
Interest expense 13,000
Net income 127,300
Instructions
Prepare an multiple steps income statement for 2015 for Howell Corporation in good form.
$ 15,000,000
(9,000,000)
6,000,000
Sales revenue
Cost of goods sold
Gross profit
Operating expenses:
General and administrative expense
Selling expense
Restructuring costs
Loss on inventory write-down
Total operating expenses
Operating income
$ (1,000,000)
(500,000)
(300,000)
(400,000)
(2,200,000)
3,800,000
Other income (expense):
Interest expense
(700,000)
3,100,000
(775,000)
2,325,000
Income before income taxes
Income tax expense
Net income
Other comprehensive income, (net of tax):
Foreign currency translation adjustment
Gains on debt securities
Total other comprehensive income (loss)
Comprehensive income
Chapter 1 Solutions
Connect Access Card for Financial Accounting
Ch. 1 - Define accounting.Ch. 1 - Briefly distinguish financial accounting from...Ch. 1 - Prob. 3QCh. 1 - Prob. 4QCh. 1 - Prob. 5QCh. 1 - Complete the following: Name of Statement...Ch. 1 - What information should be included in the heading...Ch. 1 - What are the purposes of (a) the income statement,...Ch. 1 - Explain why the income statement and the statement...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Explain the equation for the income statement....Ch. 1 - Explain the equation for the balance sheet. Define...Ch. 1 - Explain the equation for the statement of cash...Ch. 1 - Explain the equation for retained earnings....Ch. 1 - The financial statements discussed in this chapter...Ch. 1 - Prob. 17QCh. 1 - Prob. 18QCh. 1 - (Supplement A) Briefly differentiate between a...Ch. 1 - Prob. 20QCh. 1 - Which of the following is not one of the four...Ch. 1 - Prob. 2MCQCh. 1 - Prob. 3MCQCh. 1 - Which of the following regarding retained earnings...Ch. 1 - Which of the following is not one of the four...Ch. 1 - Prob. 6MCQCh. 1 - Prob. 7MCQCh. 1 - Which of the following is true regarding the...Ch. 1 - Prob. 9MCQCh. 1 - Prob. 10MCQCh. 1 - Matching Elements with Financial Statements M1-1...Ch. 1 - Matching Financial Statement Items to Financial...Ch. 1 - Prob. 1.3MECh. 1 - Prob. 1.1ECh. 1 - Matching Financial Statement Items to Financial...Ch. 1 - Matching Financial Statement Items to Financial...Ch. 1 - Preparing a Balance Sheet Honda Motor Corporation...Ch. 1 - Completing a Balance Sheet and Inferring Net...Ch. 1 - Prob. 1.6ECh. 1 - Preparing an Income Statement and Inferring...Ch. 1 - Prob. 1.8ECh. 1 - Inferring Values Using the Income Statement and...Ch. 1 - Inferring Values Using the Income Statement and...Ch. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Preparing a Statement of Stockholders Equity...Ch. 1 - Focus on Cash Flows: Matching Cash Flow Statement...Ch. 1 - Preparing an Income Statement, Statement of...Ch. 1 - Analyzing a Student's Business and Preparing an...Ch. 1 - Comparing Income with Cash Flow (Challenging)...Ch. 1 - Evaluating Data to Support a Loan Application...Ch. 1 - Preparing an Income Statement, Statement of...Ch. 1 - Analyzing a Students Business and Preparing an...Ch. 1 - Prob. 1.3APCh. 1 - Prob. 1.1CONCh. 1 - Finding Financial Information LO1-1 Refer to the...Ch. 1 - Prob. 1.2CPCh. 1 - Comparing Companies within an Industry Refer to...Ch. 1 - Using Financial Reports: Identifying and...Ch. 1 - Prob. 1.5CPCh. 1 - Prob. 1.6CPCh. 1 - Prob. 1.7CP
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