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.