Question :
185.Heywood Enterprises a famous entertainment company that produces films and : 1244212
185.Heywood Enterprises is a famous entertainment company that produces films and operates theme parks, among other things. The company is also well known as a profitable and well-managed business. On November 15, 2008, the following article appeared in the financial section of the local newspaper:
“Heywood Reports Fiscal 4th-Period Loss after Taking $166 Million Write-Down.”
Heywood Enterprises reported a $64 million net loss for its fiscal fourth quarter ended Sept. 30, after writing down a record $166 million in movies and other properties. In the year-earlier quarter, Heywood had net income of $24.5 million, or 70 cents a share. Fourth-quarter revenue this year rose 28% to $463.2 million from $363 million. In the fiscal year, the entertainment company’s earnings rose 5% to $97.8 million, or $2.73 a share, from $93.2 million, or $2.70 a share, a year earlier. Revenue rose 27% to $1.66 billion from $1.31 billion.
The company said it wrote down $112 million in motion picture and television properties. The write-down involves productions that already have been released as well as ones still under development, but Heywood declined to identify the productions or projects involved.
“This just reflects the judgment of new management about the ultimate value of projects we had under way,” said Marcia Fennel, Heywood’s executive vice president for finance. The company also said it charged off $40 million to reflect the “abandonment” of a number of planned projects at its various theme parks. An additional $14 million was charged off as a reserve to cover possible legal obligations resulting from the company’s fight to ward off a pair of successive takeover attempts last summer, Ms. Fennel said. Heywood said its full-year net income included a $76 million extraordinary gain. The change will boost that quarter’s reported net income to $85 million, from $9 million.
a. What two categories of issues does the user of financial statements want to consider when evaluating the quality of a company’s reported earnings? Did Heywood have one or both types of items in fiscal 2008?
b. Compare the fourth-period earnings or losses for 2007 and 2008 and full fiscal 2007 and 2008 earnings or losses before and after adjusting for the item or items described in part “a”. Which comparisons do you believe give the best picture of Heywood’s performance?
186.Below are the account balances for Eccles Corporation as of its fiscal year ended April 30, 20×8. Prepare a corporate income statement in good form, assuming 5,000 shares of common stock were outstanding during the year.
Administrative Expenses
$16,000
Cost of Goods Sold
80,000
Discontinued Operations
(1) Income from Operations of Discontinued Segment (net of taxes, $5,000)
20,000
(2) Loss on Disposal of Segment (net of taxes, $6,000)
14,000
Extraordinary Loss from Fire (net of taxes, $4,000)
6,000
Income Taxes Applicable to Continuing Operations
8,000
Sales
160,000
Selling Expenses
50,000
