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Category > Management Posted 09 Oct 2017 My Price 8.00

Rox Corporation

P5-8        Misclassifications  The Rox Corporation’s multiple-step income statement and retained earnings statement for the year ended December 31, 2007, as developed by its bookkeeper, are shown here:

ROX CORPORATION

Revenue Statement December 31, 2007

Sales (net)

 

$179,000

Plus: Income from operations of discontinued Division P (net of $960 income taxes)

 

2,240

Less: Dividends declared ($1.50 per common   share)

 

     (7,500)

Net revenues

 

$173,740

Less: Selling expenses

 

   (19,000)

Gross profit

Less: Operating expenses Interest expense

 

 

$  4,100

$154,740

Loss on sale of Division P (net of $1,200 income tax   credit)

2,800

 

Cost of goods sold

110,700

 

Income tax expense on income from continuing operations Total operating expenses

     5,370

 

 (122,970)

Operating income Miscellaneous items

Dividend revenue

 

 

$  1,800

$  31,770

General and administrative expenses

 (24,300)

   (22,500)

Income before extraordinary items Extraordinary items

Loss on sale of land

 

 

$ (4,800)

$     9,270

Correction of error in last year’s income (net of $1,500 income   taxes)

     3,500

     (1,300)

Net income

 

$   7,970

 

ROX CORPORATION

Retained Earnings Statement December 31, 2007

Beginning retained earnings

$ 62,850

Add: Net income

     7,970

Adjusted retained earnings

$  70,820

Less: Loss from expropriation (net of $2,760 income tax credit)

(6,440)

Ending retained earnings

$ 64,380

 

You determine that the account balances listed in the statements are correct but are incorrectly classified in certain cases. No shares of common stock were issued or retired during  2007.

Required

1.      Review both statements and indicate where each incorrectly classified item should be classified.

2.      Prepare a correct multiple-step 2007 income statement.

3.      Prepare a correct 2007 retained earnings statement.

 

 

Answers

Maurice Tutor
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Status NEW Posted 09 Oct 2017 05:10 PM My Price 8.00

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