FINANCIAL ACCOUNTING – INCOME STATEMENTS
FINANCIAL ACCOUNTING – INCOME STATEMENTS
Financial Accounting focuses heavily on finding solutions to numerical problems. With that in mind, most units will include a number of problems. For each problem, you will need to provide more than a simple numerical response. Your solutions should thoroughly address the issue and present the findings in a meaningful format similar to those developed within the chapters and as part of the review exercises solutions. Part value may be assigned for incorrect responses providing evidence of understanding of the principles exist.
The statement of earnings for Stark Ltd. during the year ended December 31, 2016 appears below:
Cost of goods sold
Expenses (Note 1)
Note 1: Includes $6,000 of interest expense, and $3,200 of income tax expense.
Average number of common shares outstanding in 2016 was 15,000.
The market price of Stark’s shares was $36 per share at the end of 2016.
Cash dividends of $6,000 were paid, $1,200 of which were paid to preferred shareholders.
Calculate the earnings per share for 2016.
Black Panther Comics Ltd, located in Wakanda had income before income tax of $110,000 and taxable income of $90,000 for 2016, the company’s first year of operations. The income tax rate in Wakanda is 25%. The company uses ASPE.
Make the entry to record Black Panther Comics Ltd. income taxes for 2016.
Show what Black Panther will report on its 2016 income statement, starting with income before taxes. Also show what Black Panther will report for current and long-term liabilities on its December 31, 2016 balance sheet.
Heimdall Psychic’s, located in Asgard, reported a number of special items on its income statement. The following data, listed in no particular order, came from Heimdall’s financial statements (amounts in thousands):
Income tax expense (savings)
Unrealized gain on derivatives
Foreign-currency translation adjustment (gain)
Income from discontinued operations
Dividends declared and paid
Total operating expenses
Prepare the Heimdall Psychic’s comprehensive income statement for the year ended September 31, 2016. Omit earnings per share.
During 2016, Magneto Magnets Inc. income statement reported income of $300,000 before tax. The company’s income tax return filed with the Canada Revenue Agency showed taxable income of $250,000. During 2016 Magneto Magnets was subject to an income tax rate of 25%. The company uses ASPE.
Journalize Magneto Magnets income taxes for 2016.
How much income tax did Magneto Magnets owe at the end of 2016?
At the beginning of 2016, Magneto Magnets balance of Future Income Tax Liability was $40,000. How much Future Income Tax Liability did Magneto Magnets report on its balance sheet at December 31, 2016?
Delicious Deserts Inc reported the following statement of changes in shareholders’ equity for the year ended June 30, 2016. The company was founded in 2011 and issued 455 million common shares. There had been no further share transactions until 2016.
Delicious Deserts Inc.
Statement of Changes in Shareholders’ Equity
For the Year Ended June 30, 2016
Balance, June 30, 2015, 455 shares outstanding
Issuance of shares (5 shares)
Stock dividend (36 shares)
Issuance of shares (2 shares)
Balance, June 30, 2016
The income tax rate is 33%. How much income before income tax did Delicious Deserts report on the income statement?
What is the stated value of a common share at June 30, 2015?
At what price per share did Delicious Deserts issue its common shares during the year?
Delicious Deserts statement of changes in shareholders’ equity lists the share transactions in the order in which they occurred. What was the percentage of the stock dividend? Round to the nearest percentage.
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