intermediate accounting 2 questions

User Generated

dhrrabs72

Business Finance

intermediate accounting acc303

Post University

Description

Due Sunday 7/23/17 by 5pm

7.

Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31):

2016 2015
Sales$4,800,000 $3,900,000
Cost of goods sold 2,940,000 2,080,000
Administrative expenses 880,000 755,000
Selling expenses 440,000 392,000
Interest revenue 158,000 148,000
Interest expense 216,000 216,000
Loss on sale of assets of discontinued component 82,000

On July 1, 2016, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2016, for $82,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows:

1/1/16-9/30/16 2015
Sales $480,000 $580,000
Cost of goods sold (330,000) (368,000)
Administrative expenses (58,000) (48,000)
Selling expenses (28,000) (38,000)






Operating income before taxes $64,000 $126,000













In addition to the account balances above, several events occurred during 2016 that have not yet been reflected in the above accounts:

1.

A fire caused $58,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event.

2.

Inventory that had cost $48,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $8,000.

3.Income taxes have not yet been recorded.
Required:

Prepare a multiple-step income statement for the Reed Company for 2016, showing 2015 information in comparative format, including income taxes computed at 40% and EPS disclosures assuming 500,000 shares of common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)


8.

For the year ending December 31, 2016, Micron Corporation had income from continuing operations before taxes of $1,250,000 before considering the following transactions and events. All of the items described below are before taxes and the amounts should be considered material.

1.

In November 2016, 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 2016. The income from operations of the chain from January 1, 2016, through November was $165,000 and the loss on sale of the chain’s assets was $310,000.

2.

In 2016, Micron sold one of its six factories for $1,300,000. At the time of the sale, the factory had a carrying value of $1,150,000. The factory was not considered a component of the entity.

3.

In 2014, Micron’s accountant omitted the annual adjustment for patent amortization expense of $125,000. The error was not discovered until December 2016.

Required:

Prepare Micron’s income statement, beginning with income from continuing operations before taxes, for the year ended December 31, 2016. Assume an income tax rate of 20%. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)



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Explanation & Answer

Find the attached doc,Best Regards

1
Running Head: FINANCIAL ANALYSIS

Financial Analysis
Student’s Name
Institution Affiliation

2
FINANCIAL ANALYSIS

Q1.
A scenario analysis is critical in stock purchase, buying a business and personal budget analysis.
It facilitates the company or an individual to plan for any future eventualities that may arise. It
has both advantages and disadvantages.
Advantages of Scenario Analysis:
Avoiding a Poor Investment
Planning for the Future
Avoiding Risk
Projecting a Return on Investment
Use in Corporate Strategy
Disadvantages of Scenario Analysis:
1) Inability to accurately measure by-products of major factor movements.
2) Incorrect assumptions and correlations,
Advantages are greater as they are very much helpful.
Q2.
Capital budgeting is critical in accountability and measurability. A business should have means
of measuring the effec...


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