Question

1-Sandhill Co. reports the following information:

Correction of understatement of depreciation expense
in prior years, net of tax	$ 1288000
Dividends declared	963000
Net income	2970000
Retained earnings, 1/1/20, as reported	6170000

Sandhill should report retained earnings, 1/1/20, as adjusted at

$7458000.

$6170000.

$9465000.

$4882000.

2-Ivanhoe Company had a 40 percent tax rate. Given the following pre-tax amounts, what would be the income tax expense reported on the face of the income statement?

Sales revenue	$ 1070000
Cost of goods sold	620000
Salaries and wages expense	81500
Depreciation expense	118000
Dividend revenue	91300
Utilities expense	9800
Discontinued operations loss	100700
Interest expense	20100

$47960

$124760

$84480

$88240

3-Gross billings for merchandise sold by Carla Vista Co. to its customers last year amounted to $12720000; sales returns and allowances were $364000, sales discounts were $174900, and freight-out was $140800. Net sales last year for Carla Vista Co. were

$12720000.

$12181100.

$12040300.

$12356000.

Answer 1

Q 1:

Answer: $4,882,000

Calculations:

Retained earnings, 1/1/20	$6,170,000
Correction of understatement of depreciation expense in prior years, net of tax	($1,288,000)
Retained earnings, 1/1/20, Adjusted	$4,882,000

Q 2:

Answer: $124,760

Calculations:

Income Statement
Revenues:
Sales revenue		$1,070,000
Dividend revenue		$91,300
Total revenues		$1,161,300
Expenses:
Cost of goods sold	$620,000
Salaries and wages expense	$81,500
Depreciation expense	$118,000
Utilities expense	$9,800
Interest expense	$20,100
Total Expenses		$849,400
Net income from continuing operations before tax		$311,900
Income Tax expense [311,900 x 40%]		($124,760)
Net income from continuing operations		$187,140
Discontinued operations loss, net of tax (100,700 x (100%-60%))		($60,420)
Net income		$126,720

Thus,Income tax expense reported on the face of the income statement is $124,760

Q 3:

Answer: $12,181,100

Calculations:

Sales	$12,720,000
Less: Sales returns	($364,000)
Sales discounts	($174,900)
Net sales	$12,181,100