Prepare a correct income statement, beginning with income before income taxes.

Prepare a correct income statement, beginning with income before income taxes.

Lewis Corporation
experienced a fire on December 31, 2015, in which its financial records were
partially destroyed. It has been able to salvage some of the records and has
ascertained the following balances.

December
31, 2015
December 31,
2014

Cash $ 30,000 $ 10,000

Receivables (net) 85,000 125,000

Inventory 200,000 180,000

Accounts payable 50,000 90,000

Notes payable 30,000 60,000

Common stock, $100 par 400,000 400,000

Retained earnings 130,000 101,000

Additional information:

1. The
inventory turnover is 4 times

2. The return on common stockholders’ equity is
20%. The company had no additional paid-in capital.

3. The
accounts receivable turnover is 8.6 times.

4. The
return on assets is 16%.

5. Total
assets at December 31, 2014, were $685,000.

Instructions

Compute the
following for Lewis Corporation.

(a) Cost of goods sold for 2015.

(b) Net sales (credit) for 2015.

(c) Net income for 2015.

(d) Total assets at December 31, 2015.

Ex. 217

For its
fiscal year ending December 31, 2014, Conner Corporation reported the following
partial data

Income
before income taxes $1,200,000

Income
tax expense (30% x 950,000) 285,000

Income
before extraordinary items 915,000

Extraordinary
loss from flood 250,000

Net
income $665,000

The flood
loss is considered an extraordinary item. The income tax rate is 30% on all
items.

Instructions

Prepare a
correct income statement, beginning with income before income taxes.


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