Income tax Net income Retained earnings at beginning of period, as previously re
ID: 2524362 • Letter: I
Question
Income tax Net income Retained earnings at beginning of period, as previously reported Adjustment required for correction of error Retained earnings at beginning of period, as restated Dividends on ordinary shares Retained earnings at end of period 37,600 141000 (7,000) 134,000 (12,200) Y159,400 Additional facts are as follows. expenses" for 2019 included a charge of Y8,500,000 for im- I. Selling, general, and administrative pairment of intangibles. 2. "Other, net" for 2019 was a loss on sale of equipment of Y17,000,000. tment required for correction of an error" was a result of a change in estimate (useful life of certain assets reduced to 8 years and a catch-up adjustment made). 4. Sapporo Company disclosed earnings per share for net income in the notes to the financial statements. Instructions Determine from these additional facts whether the presentation of the facts in the Sapporo Ltd. income and retained earnings statement is appropriate. If the presentation is not appropriate, describe the appro- priate presentation and discuss it P4.7 (L045) (Retained Earnings Statement, Prior Period Adjustment) The following is the retained earnings account for the year 2019 for Acadian Corp. s theoretical rationale. (Do not prepare a revised statement.) $257,600 Retained earnings, January 1,2019 Add: Gain on sale of investments Net income Refund on litigation with government Recognition of income in 2018, but omitted from income $41,200 84,500 21,600 statement in that year 25,400 172,700 430,300 Deduct: 35,000 Loss on discontinued operations Write-off of goodwill Cumulative effect on income of prior years in changing from 60,000 23,200 32,000 average-cost to FIFO inventory valuation in 2019 Cash dividends declared 150,200 $280,100 Retained earnings, December 31, 2019 Instructions used in 2019 to compute net income. P4.8 (LO2,3,4) considered in the 1,210,000 are as follows. a. Prepare a corrected retained earnings statement. (Ignore income tax effects.) FIFO inventory was b. State where the items that do not appear in the corrected retained earnings statement should be shown. (Income Statement) Wade NV has 150,000 ordinary shares of outstand- Groupwork ing. In 2019, the company reports income before income tax of 1.210,000. Additional transactions notExplanation / Answer
a. Corrected Retained Earning Statement for the year 2019 Retained earning as on jan 1 $257,600 Correction of Error From Prior Period $25,400 Cumulative effect on income of prior years in changing from Average Cost to FIFO inventory valuation in 2019 (net of tax) -$23,200 AdjustedRetained Earnings $259,800 Add:net income** $52,300 Less:cash dividend -$32,000 Retained earning at end $280,100 **Computation of Total Income Particular Amount Gain on Sale of Investment ( Net of Tax) $41,200 Net Income $84,500 Refund on Litigation with Government $21,600 Less: Loss on Discountinued Operation -$35,000 Less: Write off Goodwill -$60,000 Total Income $52,300 b. Item shown in corrected Retained Earning Item Comment Gain on Sales of Investment it is basically a gain of the company. However, It Should not be included in the income statement , Refund on litigation with Government It Should be shown in income statement under the category of Unusal Items. Write Off Goodwill It Should be shown in income statemnt under the category of Unusal Items. Loss on discontinued Operation It Should be shown in income statemnt under the category of Income from Continuing Operation.