Accounting timed exercise | Accounting homework help
- Exercise 1: (60 points)
During year 2021, Linston Inc. obtained an income after taxes from continuing activities of $1,293,000
During the month of November, an earthquake affected one of the company’s plant and implied a loss before taxes of $160,000. Also, the company decided to sell a segment of activity. The segment generated losses before taxes prior to its disposal for $36,000. The sale of the assets of the segment implied a loss before taxes of $20,000
Finally, the accountant of the company decided to change the depreciation method of the assets from straight line to double declining balance method. This implied an additional expense of $23,000
Tax rate is 25%.
1.- Prepare the income statement of the company and calculate the net income obtained in 2021 (30 points)
2.- Prepare the earning per share figure for each section of the income statement taking into account that the company had an average of 80,000 shares of common stocks outstanding throughout year 2021, and 10% preferred stocks outstanding for a total amount of $1,200,000. (30 points)
Exercise 2: (40 points)
The company shows the following balances for certain current assets and current liabilities accounts at January 1, 2021 and December 31, 2021.
During the year, the company obtained a net income of $127,000
This net income includes the gain of $12,000 obtained in the sale of a plant asset for a total price of $123,000, and a depreciation expense of $123,000. Besides, during the year 2021 the company paid dividends for $50,000 to its stockholders and issued common stocks for a total amount of $40,000 During year 2021, the company repaid a note payable for $54,000.
On January 1st, 2021, the balance of the cash account was $347,000
1.- Prepare a statement of cash flow separating cash flows from operating, investing and financing activities (30 points)
2.- Calculate the balance of the cash account at December 31. (10 points)
