Accounting Homework

I have three accounting questions – Please review the questions and please make sure you can complete them correctly before offering to do them.

 

E 4-9

The Esposito Import Company had 1 million share of common stock outstanding during 2013. Its income statement reported the following items: income from continuing operation, $5 million; loss from discontinued operations, $1.6 million; extraordinary gain, $2.2 million. All of these amounts are net of tax.

Required: Prepare the 2013 EPS (Earnings Per Share) Presentation for the Esposito Import Company.

E 4-12

The following summary transactions occurred during 2013 for Bluebonnet Bakers:

Cash Received from:

Customers $380,000

Interest on note receivable 6,000

Principal on note receivable 50,000

Sale of investments 30,000

Proceeds from note payable 100,000

Cash Paid For:

Purchase of inventory 160,000

Interest on note payable 5,000

Purchase of equipment 85,000

Salaries to employees 90,000

Principal on note payable 25,000

Payments of dividends to shareholders 20,000

The balance of cash and cash equivalents at the beginning of 2013 was $17,000

Required: Prepare a statement of cash flows for 2013 for Bluebonnet Bakers. Use the direct method for reporting operating activities.

E 4-13

The following condensed income statements of the Huntington Steel Corporation are presented for the two years ended December 31, 2011 and 2010:

 

 

 

 

 

 

 

 

2011

2010

Sales

 

 

20,000,000

19,600,000

Cost of goods sold

 

13,400,000

13,200,000

Gross profit

 

6,600,000

6,400,000

Operating expenses

2,700,000

2,600,000

Operating income

 

3,900,000

3,800,000

Gain on sale of division

800,000

0

 

 

 

4,700,000

3,800,000

Income tax expense

1,880,000

1,520,000

Net income

 

2,820,000

2,280,000

 

 

 

 

 

  

On September 6, 2011, Huntington entered into an agreement to sell the assets of one of its divisions. The division comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the company. The division was sold on December 31, 2011, for $7,000,000. Book value of the division’s assets was $6,200,000. The division’s contribution to Huntington’s operating income before-tax for each year was as follows:

 

                        2011                      $455,000 loss

                        2010                      $325,000 income

 

Assume an income tax rate of 40%.

 

Instructions:

1.   Prepare revised income statements for both years according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.

2.   Assume that by December 31, 2011, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $7,000,000. How would the presentation of discontinued operations be different from your answer to requirement 1?

3.   Assume that by December 31, 2011, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $5,000,000. How would the presentation of discontinued operations be different from your answer to requirement 1?

 

NOTE: an income statement does not have to be prepared for Instructions 2 and 3.  An explanation will suffice.