In: Accounting
1. An inexperienced accountant for Martinez Corp. showed the
following in the income statement: net income $215,970 and
unrealized gain on available-for-sale securities (before taxes)
$93,000. The unrealized gain on available-for-sale securities
subject to a 31% tax rate.
Prepare a correct statement of comprehensive income.
MARTINEZ CORP. |
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select a comprehensive income item DividendsExpensesNet Income / (Loss)Retained EarningsRevenueTotal ExpensesTotal RevenuesIncome Tax ExpenseOther Comprehensive IncomeUnrealized Gain on Available-for-Sale SecuritiesIncome Before Income TaxesComprehensive IncomeUnrealized Loss on Available-for-Sale Securities |
$enter a dollar amount |
|
select an opening section name DividendsExpensesNet Income / (Loss)Retained EarningsRevenueTotal ExpensesTotal RevenuesIncome Tax ExpenseOther Comprehensive IncomeUnrealized Gain on Available-for-Sale SecuritiesIncome Before Income TaxesComprehensive IncomeUnrealized Loss on Available-for-Sale Securities |
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select a comprehensive income item DividendsExpensesNet Income / (Loss)Retained EarningsRevenueTotal ExpensesTotal RevenuesIncome Tax ExpenseOther Comprehensive IncomeUnrealized Gain on Available-for-Sale SecuritiesIncome Before Income TaxesComprehensive IncomeGain on Available-for-Sale Securities |
enter a dollar amount |
|
select a closing name for this statement DividendsExpensesNet Income / (Loss)Retained EarningsRevenueTotal ExpensesTotal RevenuesIncome Tax ExpenseOther Comprehensive IncomeUnrealized Holding Gain on Available-for-Sale SecuritiesIncome Before Income TaxesComprehensive Income |
$enter a total amount for this statement |
2. For its fiscal year ending October 31, 2022, Indigo Corporation reports the following partial data.
Income before income taxes |
$624,000 | |
Income tax expense (24% × $471,000) |
113,040 | |
Income from continuing operations |
510,960 | |
Loss on discontinued operations |
117,900 | |
Net income |
$393,060 |
The loss on discontinued operations was comprised of a $38,200 loss
from operations and a $79,700 loss from disposal. The income tax
rate is 24% on all items.
Prepare a correct partial income statement beginning with income
before income taxes.
INDIGO CORPORATION |
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select an income statement item ExpensesDiscontinued OperationsLoss on DisposalRevenueIncome from Continuing OperationsRetained EarningsLoss from OperationsNet Income / (Loss)Other Comprehensive IncomeTotal RevenuesIncome Tax ExpenseTotal ExpensesIncome Before Income TaxesDividendsComprehensive IncomeUnrealized Holding Loss of Available-for-Sale Securities |
$enter a dollar amount |
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select an income statement item ExpensesTotal ExpensesIncome Before Income TaxesRetained EarningsUnrealized Holding Loss of Available-for-Sale SecuritiesComprehensive IncomeRevenueIncome Tax ExpenseLoss from OperationsNet Income / (Loss)Income from Continuing OperationsLoss on DisposalTotal RevenuesOther Comprehensive IncomeDiscontinued OperationsDividends |
enter a dollar amount |
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select a summarizing line for the first part ExpensesNet Income / (Loss)Loss from OperationsRevenueIncome Tax ExpenseTotal RevenuesRetained EarningsOther Comprehensive IncomeDividendsLoss on DisposalUnrealized Holding Loss of Available-for-Sale SecuritiesDiscontinued OperationsComprehensive IncomeTotal ExpensesIncome from Continuing OperationsIncome Before Income Taxes |
enter a total amount for the first part |
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select an opening section name Loss on DisposalNet Income / (Loss)ExpensesComprehensive IncomeDividendsDiscontinued OperationsIncome from Continuing OperationsRetained EarningsRevenueOther Comprehensive IncomeTotal RevenuesIncome Tax ExpenseTotal ExpensesLoss from OperationsUnrealized Holding Loss of Available-for-Sale SecuritiesIncome Before Income Taxes |
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select an income statement item Income from Continuing OperationsDiscontinued OperationsIncome Tax ExpenseComprehensive IncomeRevenueRetained EarningsIncome Before Income TaxesOther Comprehensive IncomeUnrealized Holding Loss of Available-for-Sale SecuritiesExpensesNet Income / (Loss)DividendsTotal RevenuesLoss from OperationsTotal ExpensesLoss on Disposal |
$enter a dollar amount |
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select an income statement item DividendsLoss on DisposalRevenueDiscontinued OperationsUnrealized Holding Loss of Available-for-Sale SecuritiesTotal ExpensesIncome from Continuing OperationsTotal RevenuesNet Income / (Loss)Other Comprehensive IncomeIncome Tax ExpenseIncome Before Income TaxesLoss from OperationsComprehensive IncomeRetained EarningsExpenses |
enter a dollar amount |
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enter a subtotal of the two previous amounts |
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select a closing name for this statement Income Before Income TaxesLoss from OperationsIncome from Continuing OperationsOther Comprehensive IncomeDividendsIncome Tax ExpenseTotal RevenuesComprehensive IncomeUnrealized Holding Loss of Available-for-Sale SecuritiesRetained EarningsExpensesRevenueLoss on DisposalDiscontinued OperationsTotal ExpensesNet Income / (Loss) |
$enter a total net income or loss amount |
3. Here is the income statement for Marin Inc.
MARIN INC. |
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Sales revenue |
$425,500 |
|
Cost of goods sold |
240,400 |
|
Gross profit |
185,100 |
|
Expenses (including $12,000 interest and $26,000 income taxes) |
75,420 |
|
Net income |
$ 109,680 |
Additional information:
1. | Common stock outstanding January 1, 2022, was 26,300 shares, and 36,100 shares were outstanding at December 31, 2022. | |
2. | The market price of Marin stock was $13.94 in 2022. | |
3. | Cash dividends of $25,536 were paid, $3,600 of which were to preferred stockholders. |
Compute the following measures for 2022. (Round
earnings per share to 2 decimal places, e.g 1.83 and all other
answers to 1 decimal place, e.g. 1.8 or
2.5%)
(a) |
Earnings per share |
$Enter earnings per share in dollars rounded to 2 decimal places |
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(b) |
Price-earnings ratio |
Enter price-earnings ratio in times rounded to 1 decimal place |
times | ||
(c) |
Payout ratio |
Enter payout ratio in percentages rounded to 1 decimal place |
% | ||
(d) |
Times interest earned |
Enter times interest earned rounded to 1 decimal place |
times |
Answer:
1)
MARTINZ CORP Partial Statement of Comprehensive Income |
|
Income Before Income Taxes | 215970 |
Income Tax Expense | 93000 |
Net Income | 122970 |
Other Comprehensive Income | |
Unrealized Holding Gain on Available for Sale Securities | 46196 |
Comprehensive Income | 169166 |
Working notes:
Income tax expenses = 215970*31% = 66951
Unrealized Holding Gain on Available for Sale Securities =
66951*(100%-31%) = 46196
2.)
INDIGO CORP Partial Statement of Comprehensive Income For the Year Ended October 31, 2019 |
||
Income before Income Taxes | 624000 | |
Income Taxes Expenses | 149760 | |
Income from Continuing Operations | 474240 | |
Discounted Operations | ||
Loss from Operations | 29032 | |
Loss from Disposal | 60572 | 89604 |
Net Income / (Loss) | 384636 |
Working Notes:
Income Tax expense = 624000*24% = 149760
Loss from operations = 38200-(38200*24%) = 29032
Loss on disposal = 79700-(79700*24%) = 60572
3.)
(a) Earnings per share= (Net Income - preferred dividend) / Weighted average shares outstanding
= (109680 $ - 3600 $)/ {(26300+36100)/2}
= 106080/31200
=3.4 $ per share
(b) Price Earning Ratio= Market price/ EPS
= 13.94/3.4 = 4.1 times
(c) Payout ratio= Total Dividend/ Net Income
= (25536$ - 3600)/ 109680 $= 0.2 times or 20%
(d) Times Interest earned= Income before interest expense and tax / Interest expense
= (109680 $ + 12000 $+ 26000 $) / 12000 $=
= 12.31 times