E4-6 (Multiple-step and Single-step) The accountant ofWeatherspoon Shoe Co. has compiled thefollowing information from the company’s records as a basisfor an income statement for the year ended December 31,2010.
Rental revenue $ 29,000
Interest expense 18,000
Market appreciation on land above cost 31,000
Wages and salaries—sales 114,800
Materials and supplies—sales 17,600
Income tax 30,600
Wages and salaries—administrative 135,900
Other administrative expenses 51,700
Cost of goods sold 516,000
Net sales 980,000
Depreciation on plant assets (70% selling, 30% administrative)65,000
Cash dividends declared 16,000
There were 20,000 shares of common stock outstanding during theyear.
Instructions
(a) Prepare a multiple-step income statement.
(b) Prepare a single-step income statement.
(c) Which format do you prefer? Discuss.
E4-16 (Various Reporting Formats) The following informationwas taken from the records of Gibson Inc. for theyear 2010. Income tax applicable to income from continuingoperations $119,000; income tax applicable to loss ondiscontinued operations $25,500; income tax applicable toextraordinary gain $32,300; income tax applicable toextraordinary loss $20,400; and unrealized holding gain onavailable-for-sale securities $15,000.
Extraordinary gain $ 95,000 Cash dividends declared $ 150,000
Loss on discontinued operations 75,000 Retained earnings January 1,2010 600,000
Administrative expenses 240,000 Cost of goods sold 850,000
Rent revenue 40,000 Selling expenses 300,000
Extraordinary loss 60,000 Sales 1,700,000
Shares outstanding during 2010 were 100,000.
Instructions
(a) Prepare a single-step income statement for 2010.
(b) Prepare a retained earnings statement for 2010.
(c) Show how comprehensive income is reported using the secondincome statement format.
E18-4 (Recognition of Profit on Long-Term Contracts) During2010 Nilsen Company started a construction job with acontract price of $1,600,000. The job was completed in 2012. Thefollowing information is available.
2010 2011 2012
Costs incurred to date $400,000 $825,000 $1,070,000
Estimated costs to complete 600,000 275,000 –0–
Billings to date 300,000 900,000 1,600,000
Collections to date 270,000 810,000 1,425,000
Instructions
(a) Compute the amount of gross profit to be recognized each yearassuming the percentage-ofcompletion
method is used.
(b) Prepare all necessary journal entries for 2011.
(c) Compute the amount of gross profit to be recognized each yearassuming the completed-contract
method is used.
E18-5 (Analysis of Percentage-of-Completion FinancialStatements) In 2010, Steinrotter Construction Corp.began construction work under a 3-year contract. The contract pricewas $1,000,000. Steinrotter uses the percentage-of-completionmethod for financial accounting purposes. The income to berecognized each year is based on the proportion of costincurred to total estimated costs for completing the contract.The financial statement presentations relating to thiscontract at December 31, 2010, follow.
Balance Sheet
Accounts receivable—construction contract billings $18,000
Construction in progress $65,000
Less: Contract billings 61,500
Cost of uncompleted contract in excess of billings 3,500
Income Statement
Income (before tax) on the contract recognized in 2010 $19,500
Instructions
(a) How much cash was collected in 2010 on this contract?
(b) What was the initial estimated total income before tax on thiscontract?
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