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ACC421 Wiley Week 2 E4-6 E4-16 E18-4 E18-5

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E4-6 (Multiple-step and Single-step) The accountant of Weatherspoon Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2010.

Rental revenue 29,000
Interest expense 18,000
Market appreciation on land above cost 31,000
Wages and salaries- Sales 114,800
Materials and supplies - sales 17,600
Income tax 30,600
Wages and salaries - administrative 135,900
Other adminstrative expenses 51,700
Cost of goods sold 516,000
Net sales980000
Depreciation on plant assets (70% selling, 30% administrative) 65,000
Cash dividends declared 16,000

There were 20,000 shares of common stock outstanding during the year.

Instructions
(a) Prepare a multiple-step income statement.
(b) Prepare a single-step income statement.
(c) Which format do you prefer? Discuss.

E4-16 (Various Reporting Formats) The following information was taken from the records of Gibson Inc. for the year 2010. Income tax applicable to income from continuing operations $119,000; income tax applicable to loss on discontinued operations $25,500; income tax applicable to extraordinary gain $32,300; income tax applicable to extraordinary loss $20,400; and unrealized holding gain on available-for-sale securities $15,000.

Rental revenue 29,000
Interest expense 18,000
Market appreciation on land above cost 31,000
Wages and salaries- Sales 114,800
Materials and supplies - sales 17,600
Income tax 30,600
Wages and salaries - administrative 135,900
Other adminstrative expenses 51,700
Cost of goods sold 516,000
Net sales980,000


Shares outstanding during 2010 were 100,000.

Instructions
(a) Prepare a single-step income statement for 2010.
(b) Prepare a retained earnings statement for 2010.
(c) Show how comprehensive income is reported using the second income statement format.

E18-4 (Recognition of Profit on Long-Term Contracts) During 2010 Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2012. The following information is available.


Cost incurred to date  400,000  825,000  1,070,000
Estimated costs to complete  600,000  275,000  -  
Billings to date  300,000  900,000  1,600,000
Collection to date    270,000  810,000  1,425,000

Instructions
(a) Compute the amount of gross profit to be recognized each year assuming the percentage-ofcompletion
method is used.
(b) Prepare all necessary journal entries for 2011.
(c) Compute the amount of gross profit to be recognized each year assuming the completed-contract
method is used.

E18-5 (Analysis of Percentage-of-Completion Financial Statements) In 2010, Steinrotter Construction Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Steinrotter uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2010, follow.


Accounts receivable  18,000
Construction in process  65,000
Less: contracts billings  61,500
Cost of uncompleted   3,500

Income Statement
Income (before tax) on the contract recognized in 2010 $19,500

Instructions
(a) How much cash was collected in 2010 on this contract?
(b) What was the initial estimated total income before tax on this contract?

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