4.The following are the revenue and expense accounts for the year ending August 31, 2009, for Hammer Corporation:
Sales revenue
|
$70,000
|
Interest revenue
|
3,000
|
Interest expense
|
2,000
|
Gain from sale of land
|
8,000
|
Cost of goods sold
|
45,000
|
Administrative expense
|
9,000
|
Extraordinary gain
|
3,500
|
Income tax expense
|
4,200
|
A.Calculate the amount of gross profit for Hammer Corporation for the year ending August 31, 2009.
B.How much should be reported as ‘Other Revenues’?
5.Badger, Inc. is planning a major stock issuance in early 2010. During 2009, the company reported net income from operations of $530,000 before taxes. The items below describe major events that occurred during 2009.
1.A $52,000 gain was recognized on the sale of a subsidiary
2. Inventory was written down by $21,000 due to obsolescence
3.A forced government takeover of a company plant in India that had a book value of $320,000
4.A $31,000 gain was recognized due to the adoption of a new FASB statement
The company's tax rate is 30 percent.
A. Which items should not be reported as a component of income from continuing operations?
B.Suppose management decided to exclude all of the above items from income from continuing operations. What effect might this have on investor and creditor decisions?
6.Hamilton Corp. had the following infrequent income statement items during 2009:
$45,000 of dividends received from a stock investment
$20,000 gain on the sale of a plant asset which became outdated because of new technology
$19,000 loss due to the sale of treasury stock at a price less than its original cost
$34,000 fair value adjustment increase to market for available-for-sale investments
$50,000 interest expense for the year of which only $42,000 was actually paid
How much should Hamilton report as a component of ‘income from continuing operations’?
7.On January 1, total assets and liabilities were $30,000 and $12,000, respectively. On December 31, total assets and liabilities were $28,000 and $20,000, respectively. During the year, $7,000 of dividends were declared and paid and no stock was purchased or issued. Calculate the amount of net income or loss for the year.