The following income statement was prepared by Walters Corporation a seller of equipment for the year ended Dec-31, 2013
Walters Corporation
Comprehensive Income Statement
For the year ended Dec-31, 2013
Sales revenue (Note: 1)……………………………………………………………………………………... $310,000
Cost of goods sold…………………………………………………………………………………………………………..…(140,000)
Gross profit………………………………………………………………………………………………………………………. 170,000
Less: Operating Expenses.
Selling and administrative expenses…………………………………………50,000
Loss on sale of Investment……………………………………………………… 15,000 (65,000)
Other income and expense
Gain on sale of plant assets…………….………………………………....... 40,000
Depreciation expense……………………………………………….……..….. (15,000)
Rent Expense………………………………………………………….……..…….. (6,000)
Dividend revenue…………………………………………………………….…… 50,000
Gain on disposal of a business division (net of tax)…………………. 30,000
Loss due to earthquake (Note-2) ………………………………...………… (5,000) 94,000
Income from operations…………………………………………………………………………………..……………….. 199,000
Interest expense………………………………………………………………………………………………………………. (6,000)
Income before tax..……………………………………………………………………………………….………………….….193,000
Tax Expense………………………………………………………………………………………………………………………….(15,000)
Net Income ………………………………………………………………………………………………….………………….…..178,000
Discontinued operations
Loss on operation of discontinued division (Note-3)..………………………………………………………… (10,000)
Net Income before extraordinary Item…………………………………………………………………………….168,000
Extra ordinary item
Loss on Impairment of Equipment………………………………………….…2,000
Restructuring Cost…………………………………………………………………….4,000 (6,000)
Net Income after extraordinary item …………………………………………………………………………………. 162,000
Basic EPS ……………………………………………………………………….…………………………………………… $13.5/share
Diluted EPS……………………………………………………………………………………………………………..……….$ 15/share
Attributable to
Non-controlling interest…………………………………..……………………………………………………….………. 40,500
Shareholders of Walters………………………………………….…………………………………………….…….…. 121,500
Explanation of Notes
Note 1: Including in the Sales
Note 2: The loss is unexpected as this place has never experienced earthquake in past 30 years
Note-3 The tax in respect of loss on operations of discontinued division is amounting $ 2,000
Required:
Comment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales revenue i.e of $ 310000 includes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A | $ 50000 related to good sent on consignment basis | Consignment sale is a sale which is made on cindition that payment only be made by consignee when the good is sold by them . So it a part of sale what is questionable there is payment and it think what walter did of take this as a part of sale is correct. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B | $15000 is related to goods sold with buy back | it means that walter required to purchase it after a peeriod so it should not be a part of sale because no risk and reward has been transferred. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
C | $ 20000 in respect of layaway sale initial payment made by customer | According to the accounting principal sale would be recorded as revenue only and when it is expected the sale would turn in to revenue or certain payment has been made by customer . Which is however made by the customer in this case so the treatment made i.e include it in sale is correctt. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
D | $ 60000 title transferred but good not send on customer request. | So in regard to this transaction title has transferred so the risk and reward has been transferred and delievery is behold on the request of customer only so there is or may happen to be no defualt on walter side . So inclusion of this amount in to sale is very well satisfactory. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The following income statement was prepared by Walters Corporation a seller of equipment for the year...
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