Pitchfork, Inc. is preparing its 2020 financial statements. The
company's accountant calculated Income from Continuing Operations
to be $1,700,000, but upon further review is not certain this
number is accurate. Pitchfork has a corporate income tax rate of
30%. Additionally, the company reports only one year of financial
data on the face of the financial statements. All
amounts listed are pretax unless otherwise noted. After
reviewing the following information, determine the appropriate
adjustments, if any, to Income from Continuing Operations. Once you
have determined the CORRECT Income from Continuing Operations,
complete the remainder of the Income Statement for reporting
EPS.
1. On January 1, 2017, Pitchfork purchased a machine for $180,000
with a salvage value of $20,000 and useful life of eight years
which was depreciated using the straight-line method. During 2020,
Pitchfork decided to change to double-declining-balance method. The
$1,700,000 Income from Continuing Operations had already been
calculated using the straight-line depreciation method.
Determine the correct ADJUSTMENT to Income from Continuing
Operations (ICO) for Depreciation Expense in 2020.
Adjustment for Depreciation Expense (2020):___________
Continuing with the information presented in #1 above, Pitchfork
has ICO of $1,700,000 and a corporate tax rate of 30%. Determine if
ICO should be adjusted based on the following information:
2. Pitchfork had an unrealized loss from foreign currency
translation adjustments of $120,000 (pretax) that was included in
calculating the $1,700,000 income from continuing operations.
Adjustment to I.C.O. for Translation Loss from Foreign
Currency: __________
Continuing with the information presented in #1 above, Pitchfork
Inc has Income from Continuing Operations (ICO) of $1,700,000 and a
corporate tax rate of 30%. Determine if ICO should be adjusted
based on the following information:
3. During 2020, Pitchfork closed one of its stores for a pre-tax
loss of $150,000. This store closure did not
qualify as a component of the entity, nor did it
create a strategic shift in the operations of the entity.
Therefore, it should not be treated as Discontinued Operations. The
$150,000 restructuring charges were excluded in determining the
$1,700,000 income from continuing operations.
To correct I.C.O., the Adjustment for Restructuring Charges
would be $ _________
Continuing with the information presented in #1 above, Pitchfork
has Income from Continuing Operations (ICO) of $1,700,000 and a
corporate tax rate of 30%. Determine if ICO should be adjusted
based on the following information:
4. On April 1, 2019 Pitchfork paid $24,000 for two years rent on
office space and at the time debited Rent Expense.
No adjusting or correcting entries were made for this transaction
in 2019 or 2020.
a. To correct I.C.O for 2020, the correct Rent Expense
(after tax) would be: $ _________
b. Determine the amount of the Prior Period Adjustment to
be reported on the Retained Earnings Statement to correct the
Beginning Balance at Jan 1, 2020: ______
5. Pitchfork sold investments during the year that resulted in a
pre-tax loss of $18,000. The company also had unrealized gains on
Available for Sale securities of $20,000 (pre-tax). Both of these
transactions were excluded in determining the $1,700,000 Income
from Continuing Operations calculation.
To correct I.C.O. for 2020, the adjustment for gains/losses
on investments would be: $_________
6. Using the adjustments you made in items 1-5 above, determine the CORRECTED Income From Continuing Operations _________
7. Referring to the information presented above in questions 1-6, determine Pitchfork's Comprehensive Income as of year-end: $_________
1. Adjustment for Depreciation Expense (2020):$ (19,600)
Straight line depreciation for the first three years = {$ ( 180,000 - 20,000 ) / 8 } * 3 = $ 60,000.
Book value as on Jan 1, 2020 = $ 180,000 - $ 60,000 = $ 120,000.
Double declining rate of depreciation = 100 / 5 * 2 = 40 %.
Double declining depreciation expense for 2020 = $ 120,000 x 40 % = $ 48,000.
Depreciation already provided = $ 20,000.
Further depreciation expenses needed to be recognized = $ 28,000
Adjustment needed = $ 28,000 ( 1 - 0.3) = $ 19,600.
2.Adjustment to I.C.O. for Translation Loss from Foreign Currency: $ 84,000
Unrealized loss on foreign currency translations are to be reported on the Statement of Other Comprehensive Income. Therefore adjustment required = $ 120,000 * ( 1 - 0.30) = $ 84,000.
3. To correct I.C.O., the Adjustment for Restructuring Charges would be $ ( 105,000)
Adjustment needed = $ 150,000 * ( 1 - 0.3 ) = $ 105,000
4.a. To correct I.C.O for 2020, the correct Rent Expense (after tax) would be: $ ( 8,400)
Rent expense for 2020 = $ 12,000
Adjustment needed = $ 12,000 * ( 1 - 0.30) = $ 8,400.
b. Determine the amount of the Prior Period Adjustment to be reported on the Retained Earnings Statement to correct the Beginning Balance at Jan 1, 2020: $ 10,500
Unexpired rent as of Jan 1, 2020 = $ 24,000 - $ 9,000 = $ 15,000.
Therefore adjustment needed to Retained Earnings = $ 15,000 * ( 1 - 0.3) = $ 10,500.
5.
To correct I.C.O. for 2020, the adjustment for gains/losses on investments would be: $ (12,600)
Adjusted pre-tax realized loss on investments = $ 18,000 * ( 1 - 0.3) = $ 12,600.
Unrealized gain on available for sale securities has been correctly excluded.
Pitchfork, Inc. is preparing its 2020 financial statements. The company's accountant calculated Income from Continuing Operations...
Total of 6 questions. Question 9 0.71 pts USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (6) QUESTIONS: Pitchfork, Inc. is preparing its 2020 financial statements. The company's accountant calculated Income from Continuing Operations to be $1,700,000, but upon further review is not certain this number is accurate. Pitchfork has a corporate income tax rate of 30%. Additionally, the company reports only one year of financial data on the face of the financial statements. All amounts listed are pretax unless...
Company inc. is preparing its financial statements. The company's accountant calculated Income from Continuing Operations to be $500,000, but is not certain this number is accurate. Please review the following three scenarios and determine the appropriate adjustment to Income from Continuing Operations, if any, that is required for each item. All amounts listed are pre-tax unless otherwise noted. Corporate income tax rate is 30%. Scenario A: The Company has an unrealized loss on a Hedging Transaction of $10,000 (pre-tax). The...
Continuing with the information presented in #1 above, Pitchfork has Income from Continuing Operations (ICO) of $1,700,000 and a corporate tax rate of 30%. Determine if ICO should be adjusted based on the following information: 4. On April 1, 2019 Sparky paid $24,000 for two years rent on office space and at the time debited Rent Expense. No adjusting or correcting entries were made for this transaction in 2019 or 2020. a. To correct I.C.O for 2020, the correct Rent...
ABC Company is preparing its 2018 financial statements. Income from Continuing Operations (ICO) for 2018 was determined to be $1,800,000, but upon further review, ABC's accountant is not certain this number is accurate. ABC has a corporate tax rate of 30%. Additionally, the company reports one year of financial data on the face of the financial statements. Use the following information to determine the adjustments, if any, to correctly report Income From Continuing Operations. 1. During 2018, ABC experienced a labor...
Pina Colada Inc. reported income from continuing operations before tax of $2,058,500 during 2020. Additional transactions occurring in 2020 but not included in the $2,058,500 were as follows: 1. The corporation experienced an insured flood loss of $92,000 during the year. 2. At the beginning of 2018, the corporation purchased a machine for $70,800 (residual value of $17,400) that has a useful life of six years. The bookkeeper used straight-line depreciation for 2018, 2019, and 2020, but failed to deduct...
The Culver Corporation had income from continuing operations of $13 million in 2020. During 2020, it disposed of its restaurant division at a loss of $80,000 (net of tax of $38,000). Before the disposal, the division operated at a loss of $220,000 (net of tax of $135,000) in 2020. Blue Collar also had an unrealized gain-OCI of $43,000 (net of tax of $18,000) related to its FV-OCI equity investments. Culver had 10 million common shares outstanding during 2020. Prepare a...
Trayer Corporation has income from continuing operations of $260,000 for the year ended December 31, 2020. It also has the following items (before considering income taxes). 1. An unrealized loss of $84,000 on available for sale securities. 2. A gain of $25,000 on the discontinuance of a division (comprised of a $15,000 loss from operations and a $40,000 gain on disposal). Assume all items are subject to income taxes at a 16% tax rate. Prepare a statement of comprehensive income,...
Maher Inc. reported income from continuing operations before taxes during 2020 of $790,000. Additional transactions occurring in 2020 but not used in computing the $790,000 are as follows. > Sale of securities held as a part of its portfolio resulted in a loss of $57,000 (pretax). > When its president died, the corporation realized $150,000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $46,000....
Continuing from Question 2... Scenario D: A strike by the employees of a supplier during the month of September 2019 resulted in a pre-tax loss of $125,000. This was considered an unusual loss and so was recorded as Other Comprehensive Income 1. Is there an error? [Select] 2. What adjustment (if any) is needed to Desert's ICO for 2019? [Select] 3. What adjustment (if any) is needed to Desert's Comprehensive Income for 2019? [ Select] Continuing from Question 2. Scenario...
financial statements for the year 2018 include the following: Income from continuing operations, net of tax……………………… $850,000 Prior Period Adjustment, increased 2017 net income, net of tax……. $100,000 Loss from Discontinued Operations, net of tax……………………… $50,000 Cash dividends paid to common stockholders………………………..$20,000 Cash dividends paid to preferred stockholders……………………….. $5,000 On the basis of this information, the net income for 2018 is $775,000 $800,000 $850,000 $885,000