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Exam 4: The Income Statement, Comprehensive Income, and the Statement of Cash Flows

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Question 31

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The accounting records of Rockness Company provided the data below ($ in 000s). Required: Prepare a reconciliation of net income to net cash flows from operating activities.

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Question 32

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Cendant Corporation's results for the year ended December 31, 2013, include the following material items: Cendant Corporation's income from continuing operations before income taxes for 2013 is:

A) $900,000.
B) $880,000.
C) $820,000
D) $320,000.

E) C) and D)
F) A) and B)

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Question 33

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Which of the following is not true about EPS?

Popson Inc. incurred a material loss that was not unusual in character but was clearly an infrequent occurrence. This loss should be reported as:

Material restructuring costs are reported as an element of income from continuing operations.

Comprehensive income is the total change in shareholders' equity that occurred during the period.

Arrow Printers paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends on its common stock. Arrow would report cash outflows from activities, as follows:

Cash flows from investing activities do not include:

Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows?

Required: Prepare a single-step income statement with basic earnings per share disclosure.

Cahill & Sons earned before-tax income of $450,000 for its 2013 fiscal year. During the year the company experienced a $310,000 loss resulting from the expropriation of assets in a foreign country. The amount of the loss is material and the event is considered to be unusual and infrequent. The loss is not included in the $450,000 income figure. The company's income tax rate is 30%. Required: 1. Prepare a partial 2013 income statement for Cahill starting with income before tax and any separately reported items. 2. Repeat requirement 1 assuming that Cahill prepares its financial statements according to International Financial Reporting Standards.

In a recent press release, Estee Lauder Co. reported "a fiscal fourth-quarter loss due to a restructuring charge but said it expects to see earnings growth in its fiscal second through fourth quarters." The New York skin care and cosmetics company reported a net loss of $25.4 million, or 13 cents a share, for the quarter ended June 30, compared with net income of $20.4 million, or six cents a share, a year earlier. Excluding the restructuring charge of $76.9 million, or 32 cents a share, the company said profit would have been $51.5 million, or 19 cents a share. Discuss how Estee Lauder's press release relates to its earnings quality.

Jacobsen Corporation prepares its financial statement applying U.S. GAAP. During its 2013 fiscal year, the company reported before-tax income of $620,000. This amount does not include the following two items, both of which are considered to be material in amount: The company's income tax rate is 40%. In its 2013 income statement, Jacobsen would report income from continuing operations of:

Scenario 1: Assume that Jacob sold the division's assets on December 31, 2013, for $24 million. The book value of the division's assets was $19 million at that date. Under these assumptions, what would Jacob report in its 2013 income statement regarding the office equipment division? Explain where this information would be presented.

Intraperiod tax allocation is the process of associating income tax effects with the income statement components that create those effects.

The Maytag Corporation's income statement includes income from continuing operations, a loss from discontinued operations, and extraordinary items. Earnings per share information would be provided for:

Briefly explain when and why intraperiod tax allocation is necessary.

Give an example of a major investing activity cash outflow that would be reported in the statement of cash flows for a manufacturing company.

The FASB's stated preference for reporting operating cash flows is the:

Lucia Ltd. reported net income of $135,000 for the year ended December 31, 2013. January 1 balances in accounts receivable and accounts payable were $29,000 and $26,000, respectively. Year-end balances in these accounts were $30,000 and $24,000, respectively. Assuming that all relevant information has been presented, Lucia's cash flows from operating activities would be: