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Class:
Problem 04-01
REED COMPANY
Comparative Income Statements
for the Years Ended December 31
2016 2015
Sales revenue
Cost of goods sold
Gross profit
Operating expenses:
Administrative
Selling
Loss from fire damage
Loss from write-down of obsolete inventory
Total operating expenses
Operating income
Other income (expense):
Interest revenue
Interest expense
Total other expenses (net)
Income from continuing operations before
income taxes
Income tax expense
Income from continuing operations
Discontinued operations:
Income (loss) from operations of discontinued
component (including loss on disposal of
$50,000 in 2016)
Income tax benefit (expense)
Income (loss) on discontinued operations
Net income
REED COMPANY
December 31
2016 2015
Sales $ 4,400,000 $ 3,500,000
Cost of goods sold 2,860,000 2,000,000
Administrative expenses 800,000 675,000
Selling expenses 360,000 312,000
Interest revenue 150,000 140,000
Interest expense 200,000 200,000
Loss on sale of assets of discontinued component 50,000 -
1/1/13 -
Results of operations for discontinued component (included above): 9/30/16 2015
Sales $ 400,000 $ 500,000
Cost of goods sold (290,000) (320,000)
Administrative expense (50,000) (40,000)
Selling expenses (20,000) (30,000)
Operating income before taxes $ 40,000 $ 110,000
Additional information:
Uninsured damage due to fire $ 50,000
Cost of obsolete inventory $ 40,000
Obsolete inventory sold for scrap $ 5,000
Income tax rate 40%
Common stock shares 300,000
Student Name:
Class:
Problem 04-05
Operating expenses:
Selling and administrative
Restructuring costs
Total operating expenses
Operating income
Other income:
Interest revenue
Gain on sale of investments
Total other income
Income from continuing operations before
income taxes
Income tax expense
Discontinued operations
Income from operations of discontinued
component
Income tax expense
Income on discontinued operations
Net income
DUKE COMPANY
Statement of Comprehensive Income
For the Year Ended December 31, 2016
Sales revenue
Cost of goods sold
Gross profit
Operating expenses:
General and administrative
Selling
Restructuring costs
Loss from write-down of obsolete inventory
Total operating expenses
Operating income
DUKE COMPANY
December 31, 2016 Account Balances
Sales $ 15,000,000
Cost of goods sold $ 9,000,000
General and administrative expenses $ 1,000,000
Selling expenses $ 500,000
Interest expense $ 700,000
Additional information:
Restructuring costs due to plant closings $ 300,000
Inventory written off as obsolete $ 400,000
Understatement of 2015 depreciation expense $ 50,000
Foreign currency translation adjustment loss $ 200,000
Unrealized gain on investment securities $ 180,000
Effective tax rate 40%