ACC211 Chapter 4

ACC211 Chapter 4

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Brief Exercise 4-5

	Your answer is correct.

Stacy Corporation had income before income taxes for 2014 of $6,325,000. In addition, it suffered an unusual and infrequent pretax loss of $787,700 from a volcano eruption. The corporation’s tax rate is 30%. Prepare a partial income statement for Stacy beginning with income before income taxes. The corporation had 4,954,000 shares of common stock outstanding during 2014.   

Brief Exercise 4-7 Your answer is correct. Vandross Company has recorded bad debt expense in the past at a rate of 1.5% of net sales. In 2014, Vandross decides to increase its estimate to 2%. If the new rate had been used in prior years, cumulative bad debt expense would have been $385,820 instead of $302,620. In 2014, bad debt expense will be $130,260 instead of $92,200. If Vandross’s tax rate is 27%, what amount should it report as the cumulative effect of changing the estimated bad debt rate?

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Brief Exercise 4-8

	Your answer is correct.

In 2014, Hollis Corporation reported net income of $1,077,000. It declared and paid preferred stock dividends of $269,000. During 2014, Hollis had a weighted average of 199,100 common shares outstanding. Compute Hollis’s 2014 earnings per share.

Brief Exercise 4-10

	Your answer is correct.

Portman Corporation has retained earnings of $720,100 at January 1, 2014. Net income during 2014 was $1,651,000, and cash dividends declared and paid during 2014 totaled $82,800. Prepare a retained earnings statement for the year ended December 31, 2014. Assume an error was discovered: land costing $87,010 (net of tax) was charged to maintenance and repairs expense in 2011.

Exercise 4-3

	Your answer is correct.

Presented below are certain account balances of Paczki Products Co.

Rent revenue		$7,030		Sales discounts		$8,130
Interest expense		12,960		Selling expenses		99,480
Beginning retained earnings		114,960		Sales revenue		409,360
Ending retained earnings		134,780		Income tax expense		27,420
Dividend revenue		71,640		Cost of goods sold		184,410
Sales returns and allowances		12,940		Administrative expenses		83,880
Allocation to noncontrolling interest		18,960

Exercise 4-12

Eddie Zambrano Corporation began operations on January 1, 2011. During its first 3 years of operations, Zambrano reported net income and declared dividends as follows. Net income Dividends declared 2011 $43,100 $ –0– 2012 126,200 59,100 2013 168,600 55,300