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2 of $ 0 . Additional transactions occurring in 20 but not considered in the $801540 are as follows.
0 00 during the year. The tax rate on this item is %.
, the corporation purchased a machine for $56000 (salvage value of $8980) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2010, 20 , and but failed to deduct the salvage value in computing the depreciation base.
. Sale of securities held as a part of its portfolio resulted in a loss of $568 (pretax).
income by $2 20 before taxes. The FIFO method has been used for 2012. The tax rate on these items is 40%.
500 shares. (Assume a tax rate of % on all items, unless indicated otherwise.)
, 2012
7 14 16 17 18 21 22 23 24 25 26 27 28 29 31 32 33 34 35 36 37 38 39 &K000000&F
&K000000&A
1 1 3 4 5 5 7 7 ,310
8 8 7
9 9 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 ,754
21 21 22 22 23 23 8,000
24 24 ,920
25 25 26 26 ,455
$ 1, 2,455 27 27 29 29 30 30 31 31 33 33 37 37 39 39 40 40 42 42 44 44 48 48 49 51 &K000000&F 1 1 2 2 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 $ 778,956 $ 715,446 STANLEY COMPANY For the Year Ended May 31, 2012 Instructions STANLEY COMPANY &K000000&F
2
Income Statement
INCOME STATEMENT –
4
5
Torino Inc. reported income from continuing operations before taxes during
20
1
8
15
40
12
1. The corporation experienced an uninsured flood loss (extraordinary) in the amount of $
9
6
46
2. At the beginning of 20
10
11
2012
3
50
4. When its president died, the corporation realized $155000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $46120 (the gain is nontaxable).
5. The corporation disposed of its recreational division at a loss of $115500 before taxes. Assume that this transaction meets the criteria for discontinued operations.
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 $61200 and decrease
2011
13
Instructions
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 1
19
30
TORINO INC.
Income Statement (Partial)
For the Year Ended December
31
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7
8 8
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10 10
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21
Computation of income from cont. operations before taxes:
22
23
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25
26
27
28
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31
Computation of income tax:
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37
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Balance Sheet
BALANCE SHEET – 40 POINTS
The adjusted trial balance of Russell Company and other related information for the year 2012 are presented below.
RUSSELL COMPANY
2 Balance Sheet 2
3
December 31, 2012
RUSSELL COMPANY 4
Assets
Adjusted Trial Balance
December 31, 2012 6 6
Debits
Credits
Cash
$
41
Accounts Receivable
162,
45
Allowance for Doubtful Accounts
$ 8,845
Prepaid Insurance
5,578
Inventory
208,880
Equity Investments (long-term)
336,870
Land
84,750
Construction in Process (building)
141,000
Patents
40,500
Equipment
401,250
Accumulated Depreciation – Equipment
241,150
Discount on
Bonds Payable
19,860
Accounts Payable
150,314
Accrued
Expenses
47
Notes Payable
93,300
Bonds Payable
198,600
Common Stock
48
Paid in Capital in Excess of Par – Common Stock
43
Retained Earnings
170,572
$ 1,4
42
44
28 28
Additional information:
Liabilities and Stockholders’ Equity
1. The LIFO method of inventory value is used
2. The cost and fair value of the long-term investments that consist of stocks and bonds is the same.
32 32
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 $84750, as shown in the trial balance.
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4. The patents were purchased by the company at a cost of $45000 and are being amortized on a straight-line basis.
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5. Of the discount on bonds payable, $1986 will be amortized in 2013.
6. The notes payable represent bank loans that are secured by long-term investments carried at $118400. These bank loans are due in 2013.
41 41
7. The bonds payable bear interest at 8% payable every December 31, and are due January 1, 2023.
43 43
8. 588000 shares of common stock of a par value of $1 were authorized, of which 488000 shares were issued and outstanding.
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Instructions 47 47
Prepare a balance sheet as of December 31, 2012, so that all important information is fully disclosed.
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&K000000&A Statement of Cash Flows
STATEMENT OF CASH FLOWS – 50 POINTS
Stanley Company operates several stores and is a publicly traded company. The comparative balance sheet and income statement for Stanley as of May 31, 2012, are shown below. The company is preparing its statement of cash flows.
(a) Direct Method
STANLEY COMPANY
Statement of Cash Flows
STANLEY COMPANY
For the Year Ended May 31, 2012
Comparative Balance Sheet
As of May 31
2012 2011 3 3
Current Assets
Cash
$ 28,820
$ 21,310
Accounts receivable
74,890
57,740
Inventory
220,020
252,520
Prepaid expenses
8,996
7,006
Total current assets
332,726
338,576
Plant assets
Plants assets
598,430
501,650
Less accumulated
depreciation – plant assets
152,200
124,780
Net plant assets
446,230
376,870
Total assets
$ 778,956
$ 715,446
Current Liabilities
Accounts payable
$ 123,900
$ 116,000
Salaries and wages payable
46,640
71,650
Interest payable
27,120
25,990
Total current liabilities
197,660
213,640
Long-term debt
Bonds payable
70,300
101,650
Total liabilities
267,960
315,290
Stockholders’ equity
Common stock, $10 par
370,000
280,000
Retained earnings
140,996
120,156
Total stockholders’ equity
510,996
400,156
(a) (Continued)
Total liabilities and stockholders’ equity
Computations:
Income Statement
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
48,459
Net income
$ 145,377
The following is additional information concerning Stanley’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, Stanley issued 1990 shares of common stock at par value.
7. Cash dividends of $124537 were declared and paid at the end of the fiscal year.
a) Prepare a statement of cash flows for Stanley 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).
(b) Indirect Method
b) Using the indirect method, calculate only the net cash flow from operating activities for Stanley Company for the year ended May 31, 2012.
Partial Statement of Cash Flows
For the Year Ended May 31, 2012
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