Reference no: EM13841275

According to the IASB Framework, what is the financial statement element that is defined as increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants?

1. The Barr Company had the following items from their 2015 income statement:

Revenue                                  $725,000

Income tax expense                         33,565

Cost of goods sold                        443,056

Other operating expenses                   13,425

Salaries and wages expense                161,110

Unrealized gain on value of investments    26,852

Weighted average number of shares         140,000

Required: Prepare a single-step income statement for 2015.

Revenue	725000
Less: Cost of goods sold	443056
Gross profit	281944
Salaries and wages expense	161110
Income from operations	120834
Unrealized gain on value and investment	26852
	147686
Less: Other operating expenses	13425
Earnings before income tax	134261
Income tax	33565
Net income	100696

Question 2 . The following is a listing of accounts for Semper Company for the year ending December 31, 2015:

Cash                                    $ 65,000

Cost of goods sold                       235,000

Administrative expenses                  145,000

Cash dividends declared                   32,000

Cash dividends paid                       27,500

Selling expenses                          97,250

Discontinued operations loss

 (before income taxes)                   (52,250)

Net sales                                604,280

Depreciation expense that was

 Not recorded in 2013                     42,500

Retained earnings, December 31, 2014     105,000

Tax rate 33%

Required: Compute net income for 2015

Retained earnings, Jan. 1, as reported		$105,000.00
Correction for overstatement of net income in prior period (depreciation error)		$42,500.00
Retained earnings, Jan. 1, as adjusted		$62,500.00
Add: Net income		$50,102.60
		$112,602.60
Less: Dividends declared		$32,000.00
Retained earnings, Dec. 31		$80,602.60
Net sales		$604,280.00
Less: cost of goods sold		$235,000.00
Gross profit		$369,280.00
Expenses
Selling expenses	$97,250.00
Administrative expenses	$145,000.00	$242,250.00
Income before income tax		$127,030.00
Income tax		$41,919.90
Income from continuing operations		$85,110.10
Discontinued operations
Loss on discontinued operations	$52,250.00
Less: Applicable income tax reduction	$17,242.50	$35,007.50
Net Income		$50,102.60

Question 3. The beginning merchandise inventory was overstated $10,000 in 2014, purchases were understated $7,000 in 2014 and the ending merchandise inventory was understated $12,000 in 2015. Assume that no corrections were made during 2014 or 2015. All other items in the income statement were correct.

1) What affect does this have on the cost of goods sold and net income for 2014 in dollars understated or overstated?
2) What affect does this have on net income and retained earnings in dollars understated or overstated for 2015?

Question 4. On December 1, 2015, Green Co. committed to a plan to dispose of its Smart business component's assets. The disposal meets the requirements to be classified as discontinued operations. On that date, Green estimated that the loss from the disposition of the assets would be $1,500,000 and Smart's 2015 operating losses were $475,000. Disregarding income taxes, what net gain (loss) should be reported for discontinued operations in Green's 2015 income statement?