Accounting For managers [Assignment One (E- Finance)]
Question One
World Services Inc. has provided the following information pertaining to the month ended October 31, 2022:
Required:
Prepare an income statement through operating income for the month ended October 31, 2022.
Sales Revenue 100,000
Less: Cost of Goods Sold 60,000
=Gross Profit 40,000
Less: Operating Expenses
Advertising Expense 4500
Supplies Expense 1,500
Rent Expense 4,000
Salaries Expense 9,500
Utilities Expense 1,100 (20,600)
Operating Income 19,400
Other Income (Expense)
Loss on sale of land (3200)
Interest expense (6900)
Earnings Before Taxes 9300
-Income tax expense (3800)
Net Income 5500
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Question Two:
Chance Company had two operating divisions, one manufacturing farm equipment and
the other office supplies. Both divisions are considered separate components as defined
by IFRS. The farm equipment component had been unprofitable, and on September 1,
2023, the company adopted a plan to sell the assets of the division. The actual sale was
effected on December 15,2023, at a price of $600,000. The book value of the division’s
assets was $1,000,000, resulting in a before- tax loss of $400,000 on the sale.
The division incurred a before-tax loss from operations of $130,000 from the beginning
of the year through December 15. The income tax rate is 20%. Chance’s after-tax profit
from its continuing operations is $350,000.
Required:
Prepare a statement of profit or loss for 2023 beginning with profit from continuing
operations. Include appropriate EPS disclosures assuming that 100,000 ordinary
shares were outstanding throughout the year.
Profit from continuing operations 350,000
Less: Discontinued operations
Loss on sale of farm component 400,000
Loss from operations 130,000
530,000 x 80% (424000)
Net Income (74000)
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Question Three
For the year ended December 31, 2023, Micron Corporation had profit from continuing
operations before taxes of $1,200,000 before considering the following transactions and
event. All of the items described below are before taxes and the amounts should be
considered material.
1. In November 2023, Micron sold its Waffle House restaurant chain that qualified as
a component of an entity. The company had adopted a plan to sell the chain in
May 2023. The operating profit of the chain from January 1, 2023 through
November was $160,000 and the loss on sale of the chain’s assets was $300,000.
2. In 2023, Micron sold one of its six factories for $1,200,000. At the time of the
sale, the factory had a carrying value of $1,100,000. The factory was not
considered a component of the entity.
3. In 2021, Micron’s accountant omitted the annual adjustment for patent
amortization expense of $120,000. The error was not discovered until December
2023.
Required:
Prepare Micron’s statement of profit or loss, beginning with profit from continuing
operations before taxes for the year ended December 31,2023. Assume an income
tax rate of 20%. Ignore EPS disclosures.
Profit from continuing operations before taxes should be adjusted first
=1200,000 + gain on sale of the factory (2) 100,000 = 1300,000
Less: Income tax expense
1300,000 x 20%= (260,000)
Profit from continuing operations net of tax 1040,000
Discontinued operations
160,000 -300,000 = -140,000 x 80% (112,000)
Net Income 928,000
Number 3 is not recorded in income statement, it is recorded in retained
earnings as prior period adjustment
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Question Four
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Sales Revenue 15,300,000
Less: Cost of Goods Sold 6200,000
Gross Profit 9,100,000
Less: operating expenses
Selling expense 1300,000
General and Administrative exp 800,000
Restructuring costs 1200,000 (3300,000)
Operating Income 5,800,000
Other Income (Expense)
Interest Revenue 85,000
-Interest Expense (180,000)
-Loss on sale of investments (220,000) (315,000)
Earnings before taxes 5485,000
Less: Income tax expense5485,000 x 20% (1,097,000)
Net Income from continuing operations 4388,000
Discontinued operations
-560+ 1400= 840,000 x 80% 672,000
Net Income 50,060,000
EPS 5060,000 /(1000,000x6/12 + 1000,000 x 6/12) 4.22
Comprehensive Income statement
Net Income 5,060,000
OCI
Unrealized gains 320,000 x 80% 256,000
Foreign currency translation loss 240,000 x 80% (192000)
Total comprehensive Income 5124,000
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