Question

In: Accounting

Selected information for Muffin’s Muffins Inc. for 2017 is presented below. All amounts are pretax. The...

Selected information for Muffin’s Muffins Inc. for 2017 is presented below. All amounts are pretax. The effective tax rate is 30% . ( USGAAP)

Gain on sale of land 193,400

Selling expenses 287,600

Accounts receivable, net 632,900

Cumulative increase in income for reduced estimate of bad debts from 3.5% to 2.25% 71,800

Sales 5,130,000

Accumulated depreciation 1,526,300

Administrative expenses 387,600

Loss from operations of discontinued line of business $ 365,000

Dividend Income 58,000

Common stock, 240,000 shares 10,172,300

Interest expense 144,200

Unrealized holding loss on available-for-sales securities 171,300

Cumulative decrease in income from change in depreciation method 104,600

Inventory 3,029,000

Loss due to flooding 293,000

Gain on disposal of discontinued line of business 183,200

Retained earnings, beg balance 3,067,900

Failed to recognize interest on investment in 2016 114,800

Foreign currency translation gain 93,700

Bonds Payable 1,875,000

Accumulated other comprehensive income (CR bal) 749,120

Cumulative increase in income of change from FIFO to weighted average 63,600

Cost of goods sold 2,905,000

Dividends declared 129,500

Based on the above information, answer the following questions.

What is the balance in accumulated other comprehensive income as of 12/31/17 and on which financial statement(s) is it reported? (THINK!)

On which financial statement(s) and in which section(s) would the adjustment for reduced estimate for bad debts be reported?

What amount would appear on a post-closing trial balance for Retained Earnings?

Prepare the earnings per share section of the 2017 income statement.

Solutions

Expert Solution

1. Accumulated Other comprehensive income: This is shown in Balance sheet under Equity

Accumulated other comprehensive income as of 1/1 (Cr Bal)              749,120
-Unrealized holding loss on available-for-sales securities              171,300
+Foreign currency translation gain                93,700
Accumulated other comprehensive income as of 12/31 (Cr Bal)              671,520


2. This will be a part of bad debt expense calculation and hence shown in profit and loss. But its directly reported on balance sheet, current assets section as a deduction from Accounts receivableReduced estimate for bad debts:

3. Retained earnings:

Sales

         5,130,000

Cost of goods sold

         2,905,000

Gross Profit

         2,225,000

Selling expenses

             287,600

Administrative expenses

             387,600

Interest expense

             144,200

Total operating expenses

           819,400

Net Operating Income

         1,405,600

Loss due to flooding

          (293,000)

Gain on sale of land

             193,400

Dividend income

               58,000

Net Income

         1,364,000

Income tax @30%

             409,200

Net income from continuing operations (a)

             954,800

Gain/ Loss from Discontinued operations

Loss from operations of discontinued line of business

          (365,000)

Gain on disposal of discontinued line of business

             183,200

Gain/ Loss from Discontinued operations

          (181,800)

Gain/ Loss from Discontinued operations, net of tax (b)

          (127,260)

Other comprehensive Income

Unrealized holding loss on available-for-sales securities

          (171,300)

Foreign currency translation gain

93700

Other comprehensive Income

             (77,600)

Other comprehensive Income, net of tax ( c )

             (23,280)

Total Comprehensive Income (a+b+c)

             804,260

Retained earnings, beg balance

         3,067,900

+ Interest on investment 2016

             114,800

Cumulative increase in income for reduced estimate of bad debts from 3.5% to 2.25%

               71,800

Cumulative decrease in income from change in depreciation method

          (104,600)

Cumulative increase in income of change from FIFO to weighted average

               63,600

Adjusted Retained earnings

         3,213,500

Net Income (a+b)

             827,540

Dividends declared

          (129,500)

Retained earnings, ending balance

         3,911,540

4.  

EPS = Net income / Weighted avg outstanding shares                     3.45
Net income              827,540
Weighted avg outstanding shares              240,000

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