239414200.xlsx.ms_office Instructions Gucci Inc. reported income from continuing operations before taxes during 2012 of $796640. Additional transactions occurring in 2012 but not considered in the $796640 are as follows. 6. The corporation decided to change its method of inventory pricing from average cost to the FIFO method. The effect of this change on prior years is to increase 2010 income by $62000 and decrease 2011 income by $20700 before taxes. The FIFO method has been used for 2012. The tax rate on these items is 40%. Prepare an income statement for the year 2012 starting with income from continuing operations before taxes. Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 121200 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.) 5. The corporation disposed of its recreational division at a loss of $116100 before taxes. Assume that this transaction meets the criteria for discontinued operations. 4. When its president died, the corporation realized $152000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $45960 (the gain is nontaxable). 3. Sale of securities held as a part of its portfolio resulted in a loss of $58120 (pretax). 2. At the beginning of 2010, the corporation purchased a machine for $55540 (salvage value of $8890) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2010, 2011, and 2012 but failed to deduct the salvage value in computing the depreciation base. 1. The corporation experienced an uninsured flood loss (extraordinary) in the amount of $86850 during the year. The tax rate on this item is 46%. Income Statement 239414200.xlsx.ms_office 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 Computation of income from cont. operations before taxes: 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 Computation of income tax: 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 GUCCI INC. Income Statement (Partial) For the Year Ended December 31, 2012 Income Statement 239414200.xlsx.ms_office Debits Credits 41,320 $ 164,958 8,467 $ 5,643 210,450 332,230 83,540 125,000 38,400 401,000 243,250 19,940 146,546 48,350 92,540 199,400 495,000 44,550 144,378 1,422,481 $ 1,422,481 $ Additional information: 1. The LIFO method of inventory value is used Instructions 7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2023. 8. 595000 shares of common stock of a par value of $1 were authorized, of which 495000 shares were issued and outstanding. Prepare a balance sheet as of December 31, 2012, so that all important information is fully disclosed. December 31, 2012 Adjusted Trial Balance 6. The notes payable represent bank loans that are secured by long-term investments carried at $121000. These bank loans are due in 2013. Cash Accounts Receivable Allowance for Doubtful Accounts Prepaid Insurance Inventory 2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same. 3. The amount of the Construction in Process account represents the costs expended to date on a building in the process of construction. (The company rents factory space at the present time.) The land on which the building is being constructed cost $83540, as shown in the trial balance. 4. The patents were purchased by the company at a cost of $42667 and are being amortized on a straight-line basis. 5. Of the discount on bonds payable, $1994 will be amortized in 2013. Equity Investments (long-term) Land Construction in Process (building) Accrued Expenses Accounts Payable Notes Payable Patents Equipment Accumulated Depreciation - Equipment Discount on Bonds Payable Bonds Payable Common Stock Paid in Capital in Excess of Par - Common Stock Retained Earnings The adjusted trial balance of Matthew Company and other related information for the year 2012 are presented below. MATTHEW COMPANY Balance Sheet 239414200.xlsx.ms_office 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 32 32 33 33 34 34 35 35 36 36 37 37 38 38 39 39 40 40 41 41 42 42 43 43 44 44 45 45 46 46 47 47 48 48 49 49 50 50 51 51 Liabilities and Stockholders' Equity MATTHEW COMPANY Balance Sheet December 31, 2012 Assets Balance Sheet 239414200.xlsx.ms_office 2012 2011 28,820 $ 21,310 $ 74,890 57,740 220,020 252,520 8,996 7,006 332,726 338,576 598,430 501,650 152,200 124,780 446,230 376,870 778,956 $ 715,446 $ 123,900 $ 116,000 $ 46,640 71,650 27,120 25,990 197,660 213,640 70,300 101,650 267,960 315,290 370,000 280,000 140,996 120,156 510,996 400,156 778,956 $ 715,446 $ Sales 1,268,450 $ Cost of goods sold 715,460 Gross profit 552,990 Expenses Salaries and wages expense 251,460 Interest expense 71,450 Depreciation expense 27,420 Other expenses 8,824 Total expenses 359,154 Operating income 193,836 Income tax expense 48,500 Net income 145,336 $ The following is additional information concerning Rucker's transactions during the year ended May 31, 2012. 1. All sales during the year were made on account. 2. All merchandise was purchased on account, compromising the total accounts payable account. 3. Plant assets costing $96780 were purchase by paying $26680 in cash and issuing 7010 shares of stock. 4. The "other expenses" are related to prepaid items. 5. All income taxes incurred during the year were paid during the year. 6. In order to supplement its cash, Rucker issued 1990 shares of common stock at par value. 7. Cash dividends of $124496 were declared and paid at the end of the fiscal year. Instructions 12 13 14 RUCKER COMPANY Comparative Balance Sheet As of May 31 For the Year Ended May 31, 2012 Current Assets Cash Accounts receivable Inventory Prepaid expenses Plants assets Less accumulated Accounts payable Income Statement RUCKER COMPANY a) Prepare a statement of cash flows for Rucker Company for the year ended May 31, 2012, using the direct method of presentation. Be sure to support the statements with the appropriate calculations. (A reconciliation of net income to net cash is not required). Net plant assets Total current liabilities Rucker Company operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Rucker as of May 31, 2012, are shown below. The company is preparing its statement of cash flows. Plant assets Total assets Current Liabilities Total current assets depreciation - plant assets Salaries and wages payable Interest payable Bonds payable Total liabilities b) Using the indirect method, calculate only the net cash flow from operating activities for Rucker Company for the year ended May 31, 2012. Total stockholders' equity Total liabilities and stockholders' equity Long-term debt Stockholders' equity Common stock, $10 par Retained earnings Statement of Cash Flows 239414200.xlsx.ms_office (a) Direct Method - COMPLETE STAEMENT 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 (a) (Continued) Computations: (b) Indirect Method - PARTIAL STATEMENT 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 For the Year Ended May 31, 2012 RUCKER COMPANY Statement of Cash Flows For the Year Ended May 31, 2012 RUCKER COMPANY Partial Statement of Cash Flows Statement of Cash Flows Overall Grade Earned Possible Income Statement 0.00 45 Balance Sheet 0.00 40 Statement of Cash Flows 0.00 50 0.00 135