Question : 11.Cabell Inc. reported ‘income from operations before taxes’ in the : 1241749

 

11.Cabell Inc. reported ‘income from operations before taxes’ in the amount of $402,000 before including the following items for the year ending December 31, 2015:

?On December 31, 2015, borrowed long-term debt of $50,000 that limits dividends to 10 percent of net income from continuing operations

?$21,000 unrealized gain from fair value adjustment related to available-for-sale investments

?$30,000 loss recognized on the sale of a trading security

?$58,000 loss recognized on a lawsuit relating to patent violations

?$11,000 government fine for environmental violation

?$63,000 write-down of obsolete inventory

?$25,000 loss on the early retirement of debt.

 

The company’s income tax rate is 30 percent. No taxes have been considered in any information provided. Prepare a calculation of income from operations starting with income from operations before taxes, as tentatively reported. Omit the heading. Be sure to label correctly.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.Hubbell Service showed the following information for 2015: Net sales revenue, $410,000; interest revenue, $11,000; cost of goods sold, $220,000; operating expense, $15,000, extraordinary gain on retirement of debt, $30,000; and dividends declared, $14,000.Calculate operating income for 2015.

 

 

 

 

13.The following are some accounts for MarvellCorp. for 20159:

Sales revenue

$102,000

Cost of goods sold

85,000

Administrative expense

34,000

Interest expense

3,000

Loss from disposal of segment

21,000

Gain from sale of land

4,000

Stock dividends declared

9,000

Loss due to permanent value decline of plant asset

6,000

Extraordinary loss from hurricane

19,000

Unrealized gain from trading securities

5,000

Interest revenue

1,000

All amounts are before income taxes. Marvell has a 30% tax rate. Determine the amount of Marvell’ ‘other revenue’ and ‘other expenses’ for 2015. List all non-income statement items and indicate on which financial statement they are reported.

 

 

 

14.Hilton Corporation’s income statement for the year ending December 31, 2015, appears below.

Net sales

$810,000

 

Cost of goods sold

(610,000)

 

Gross profit

200,000

 

Selling and administrative expenses

(90,000)

 

Net operating income

110,000

 

Gain on sale of securities

56,000

 

Interest expense

(3,000)

 

Income from continuing operations before tax

163,000

 

Income tax expense

(48,900)

 

Income from continuing operations

114,100

 

Extraordinary gain (net of tax)

22,000

 

Income before cumulative effect

136,100

 

Income effect due to change in accounting principle

32,000

 

Net income

$168,100

 

 

Compute the maximum amount of dividends Hilton can pay if it has a debt covenant expressed as 20percent of net income, and as 20 percent of net operating income. Which amount would a creditor more likely use as the restriction on dividends? Explain.

 

 

15.Jarvis Company provided the following information for the year ending December 31, 2015:

Cost of goods sold

$400,000

Gain on sale of business segment

20,000

Income tax rate

30%

Interest income

5,000

Interest expense

7,000

Loss from operation of discontinued business segment

12,000

Operating expenses

23,000

Revenue from sales

730,000

Number of shares of common stock outstanding

100,000

Prepare an income statement in good form. You may omit the heading. Include all earnings per share amounts required for the year ending December 31, 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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