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Accounting questions

PRACTICE 8

Prepare an Income Statement to determine Income from continuing operations and below the line: a) extraordinary loss ($100 tax) and b) loss in discontinued operations ($120 tax).

(PRACTICE 8) COMPUTATION OF INCOME FROM CONTINUING OPERATIONS
Sales $12,000
Cost of goods sold 5,000
Gross profit $7,000
Less: Selling and administrative expense 1,450
Operating income $5,550
Interest expense 900
Income before income taxes $4,650
Income tax expense (40%) 1,860
Income from continuing operations $2,790

(Practice 5)

PREPARE THE CALCULATION ON ACCOUNTING FOR CHANGES IN ESTIMATES
Original depreciation = $80,000/20 years = $4,000 per year
Accumulated depreciation as of January 1, 2011 = $4,000 per year × 5 years = $20,000

Revised depreciation the new total life of the asset is 25 years.

Prepare the depreciation entry for this year. Should anything else be done?

(Practice 6)

Prepare the amortization entry for this year.

Original cost of patent $ 400,000
Amortization for 3 years ($40,000 per year 2008-2010) 120,000
Remaining unamortized balance $ 280,000

New estimated life from January 1, 2011 4 years

What is the new amortization expense for the year?

Should there be a disclosure of the increase in amortization because of the change in estimate?

Solution Preview

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PRACTICE 8
Prepare an Income Statement to determine Income from continuing operations and below the line: a) extraordinary loss ($100 tax) and b) loss in discontinued operations ($120 tax).
(PRACTICE 8) COMPUTATION OF INCOME FROM CONTINUING OPERATIONS
Sales $12,000
Cost of goods sold 5,000
Gross profit $ 7,000
Less: Selling and administrative expense 1,450
Operating income $ 5,550
Interest expense 900
Income before income taxes $ 4,650
Income tax expense (40%) 1,860
Income from continuing operations $ 2,790
Loss from discontinued operations (net of tax benefit $120) 180
Income before ...

Solution Summary

The solution explains some accounting questions relating to income from operations; changes in estimates; amortization entry

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