Discuss the appropriate treatment in the income statement for the following items:
(a) Loss on discontinued operations.
(b) Non-controlling interest allocation.
An income statement is a tabular presentation of the business entities’ expenses and revenues data that facilitates the management to compute the net income or net loss earned or incurred during one accounting period.
The loss on discontinued operations is deducted from the income from continuing operations in an income statement. Also, the same deduction should be net of tax, or the company should subtract the applicable taxes from such losses to obtain accurate net income.
Non –controlling interest allocation represents the ownership position of the shareholders who own less than 50% of shares outstanding and do not allow to participate in the decision-making process.
The non-controlling interest is reported separately in the income statement as a profit’s share that belongs to the minority shareholders.
During 2017, Williamson Company changed from FIFO to weighted-average inventory pricing. Pretax income in 2016 and 2015 (Williamson’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 2016 and $170,000 in 2015. In 2017, Williamson reported a pretax income (using weighted-average pricing) of $180,000. Show comparative income statements for Williamson, beginning with “Income before income tax,” as presented on the 2017 income statement. (The tax rate in all years is 30%.)
The following are selected ledger accounts of Spock Corporation on December 31, 2017.
Cash $ 185,000 Salaries and wages expense (sales) $284,000
Inventory 535,000 Salaries and wages expense (office) 346,000
Sales revenue 4,275,000 Purchase returns 15,000
Unearned sales revenue 117,000 Sales returns and allowances 79,000
Purchases 2,786,000 Freight-in 72,000
Sales discounts 34,000 Accounts receivable 142,500
Purchase discounts 27,000 Sales commissions 83,000
Selling expenses 69,000 Telephone and Internet expense (sales) 17,000
Accounting and legal services 33,000 Utilities expense (office) 32,000
Insurance expense (office) 24,000 Miscellaneous office expenses 8,000
Advertising expense 54,000 Rent revenue 240,000
Delivery expense 93,000 Casualty loss (before tax) 70,000
Depreciation expense (office equipment) 48,000 Depreciation expense (sales equipment) 36,000
Common stock ($10 par) 900,000 Interest expense 176,000
Spock’s effective tax rate on all items is 34%. A physical inventory indicates that the ending inventory is $686,000.
Prepare a condensed 2017 income statement for Spock Corporation.
Presented below are certain account balances of Paczki Products Co.
Rent revenue $6,500 Sales discounts $7,800
Interest expense $12,700 Selling expenses $99,400
Beginning retained earnings $114,400 Sales revenue $390,000
Ending retained earnings $125,000Income tax expense $31,000
Dividend revenue $71,000Cost of goods sold $184,000
Sales returns and allowances $12,400Administrative expenses $82,500
Allocation to non controlling interest $17,000
From the foregoing, compute the following: (a) total net revenue, (b) net income, (c) dividends declared, and (d) income attributable to controlling stockholders.
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