Show the revised income before income taxes

Assignment Help Financial Accounting
Reference no: EM1314126

The question is about preparation of income statement schedule.

You have been asked by a client to review the records of Layman Lumber Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have been made for you to review the accounting records.

Your examination reveals the following:

1. Layman Lumber Company commenced business on April 1, 2005, and has been reporting on a fiscal year ending March 31. The company has never been audited, but the annual statements prepared by the bookkeeper reflect the following income before closing and before deducting income taxes.

Year Ended March 31

Income Before Taxes

2006

$71,600

2007

111,400

2008

103,580

2. A relatively small number of machines have been shipped on consignment. These transactions have been recorded as ordinary sales and billed as such. On March 31 of each years, machines billed and in the hands of consignees amounted to:

2006

$6,500

2007

none

2008

5,590

Sales price was determined by adding 30% to cost. Assume that the consigned machines are sole the following year.

3. On March 30, 2007, two machines were shipped to a customer on a C.O.D. basis. The sale was not entered until April 5, 2007, when cash was received for $6,100. The machines were not included in the inventory at March 31, 2007. (Title passed on March 30, 2007).

4. All machines are sold subject to a 5-year warranty will amount to ½ to 1% of sales. The company has charged an expense account for warranty costs incurred.

Sales per book and warranty costs were as follows:

 

 

Warranty Expense

 

Year Ended

 

for Sales Made In

 

March31

Sales

2006

2007

2008

Total

2006

$940,000

$760

 

 

$760

2007

1,010,000

360

1,310

 

1,310

2008

1,795,000

320

1,620

1,910

3,850

5. A review of the corporate minutes reveals the manager is entitled to a bonus of ½ of 1% of the income before deducting income taxes and the bonus. The bonuses have never been recorded or paid.

6. Bad debts have been recorded on a direct writeoff basis. Experience of similar enterprises indicates that losses will approximate ¼ of 1% of sales. Bad debts written off were:

 

Bad Debts Incurred on Sales Made In

 

2006

2007

2008

Total

2006

$750

 

 

 $ 750

2007

 800

 520

 

 1,320

2008

350

1,800

1,700

 3,850

7. The bank deducts 6% on all contracts financed. Of this amount, ½% is placed in a reserve to the credit of Layman Lumber Company that is refunded to Layman as finance contacts are paid in full. The reserve established by the bank has not been reflected in the books of Layman Lumber Company. The excess of credits over debits (net increase) to the reserve account with Layman Lumber Company on the books of the bank for each fiscal year were as follows.

2006

 $3,000

2007

 3,900

2008

5,100

 

$12,000

8. Commissions on sales have been entered when paid. Commissions payable on March 31 of each year were as follows.

2006

 $1,400

2007

800

2008

1,120

Instructions:
(a) Present a schedule showing the revised income before income taxes for each of the years ended March 31, 2006, 2007, and 2008. (Make computations to the nearest whole dollar.)

(b) Show all of the computations to support your revisions for (a) above.

Reference no: EM1314126

Questions Cloud

Solving problems into equation : Solving problems into equation.
Decision analysis based on carrying and ordering cost : Decision analysis based on carrying and ordering cost - Which of the ordering costs would Carolina's controller take into account in performing short-run decision analysis?
Non parametric test-kruskal wallis test : Describe what you find then produce an ANOVA for the problem.
Purpose a post-closing trial balance : Purpose a post-closing trial balance. Also prove the accuracy of subsidiary ledgers by preparing schedules of both accounts receivable and accounts payable.
Show the revised income before income taxes : Present a schedule showing the revised income before income taxes for each of the years ended March 31, 2006, 2007, and 2008. (Make computations to the nearest whole dollar.)
Construct a histogram and a frequency polygon : Using the data file below, construct a histogram and a frequency polygon. Describe the shape of this distribution.
Determining probability of examining sample mean weight : Determine the probability of examining a sample mean weight from any 20 women chosen from  this population that is less than S (your sample mean) by using population standard deviation?
Solving problems using venn diagram : Solving problems using venn diagram.
Determine diekow production''s direct materials price : Calculation of materials price and quantity variances -  Determine diekow production's direct materials price and quantity variances for the year.?????

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd