Explore BrainMass

Explore BrainMass

    Malone Corporation's Capital Structure

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    27. Malone Corporation's capital structure consists of 20,000 shares of common stock. At December 31, 1998 an analysis of the accounts and discussions with company officials revealed the following information:

    Sales $1,100,000

    Purchase discounts 18,000

    Purchases 642,000

    Earthquake loss (net of tax) (extraordinary item) 42,000

    Selling expenses 128,000

    Cash 60,000

    Accounts receivable 90,000

    Common stock 200,000

    Accumulated depreciation 180,000

    Dividend revenue 8,000

    Inventory, January 1, 1998 152,000

    Inventory, December 31, 1998 125,000

    Unearned service revenue 4,400

    Accrued interest payable 1,000

    Land 370,000

    Patents 100,000

    Retained earnings, January 1, 1998 290,000

    Interest expense 17,000

    Cumulative effect of change from straight-line to

    accelerated depreciation (net of tax) 28,000

    General and administrative expenses 150,000

    Dividends declared 29,000

    Allowance for doubtful accounts 5,000

    Notes payable (maturity 7/1/01) 200,000

    Machinery and equipment 450,000

    Materials and supplies 40,000

    Accounts payable 60,000

    The amount of income taxes applicable to ordinary income was $48,600, excluding the tax effect of the earthquake loss which amounted to $18,000 and the tax effect of the change of accounting principle which was $12,000.
    (a) Prepare a multiple step income statement.
    (b) Prepare a retained earnings statement.

    © BrainMass Inc. brainmass.com March 4, 2021, 9:20 pm ad1c9bdddf

    Solution Preview

    Multi-step Income Statement

    Sales $1,100,000
    Cost of goods sold
    Inventory Jan 1, 1998 $152,000
    Add: Purchases less purchase discounts $624,000
    Les: Inventory Dec 31, 1998 $(125,000) $651,000
    Gross Profit $449,000
    Operating expenses:
    General and administrative expenses $150,000
    Selling expenses ...

    Solution Summary

    The solution examines Malone Corporation's capital structure. The solution analyzes the accounts and discussion based on this information provided.