TAX3702 - Taxation Of Individuals (TAX3702) ASSIGNMENT 3 2021.

TAX3702 - Taxation Of Individuals (TAX3702) ASSIGNMENT 3. Taxation Of Individuals. BE4- 4 Finley Corporation had income from continuing operations of $ 10,600,000 in 2010. During 2010, it disposed of its restaurant division at an after- tax loss of $ 189,000. Prior to disposal, the division operated at a loss of $ 315,000 (net of tax) in 2010. Finley had 10,000,000 shares of common stock outstanding during 2010. Prepare a partial income statement for Finley beginning with income from continuing operations. Income from continuing operations $10,600,000 Discontinued operations Loss from operation of discontinued restaurant division (net of tax) $315,000 Loss from disposal of restaurant division (net of tax) 189,000 504,000 Net income $10,096,000 Earnings per share Income from continuing operations $1.06 Discontinued operations, net of tax (0.05)* Net income $1.01 *Rounded E4- 8 ( Multiple-step Statement with Retained Earnings) Presented below is information related to Brokaw Corp. for the year 2010. Net sales $ 1,200,000 Write- off of inventory due to obsolescence $ 80,000 Cost of goods sold 780,000 Depreciation expense omitted by accident in 2009 40,000 Selling expenses 65,000 Casualty loss ( extraordinary item) before taxes 50,000 Administrative expenses 48,000 Cash dividends declared 45,000 Dividend revenue 20,000 Retained earnings at December 31, 2009 980,000 Interest revenue 7,000 Effective tax rate of 34% on all items This study source was downloaded by from CourseH on :30:42 GMT -05:00 This study resource was shared via CourseH S - The Marketplace to Buy and Sell your Study Material Downloaded by: Studypool | Distribution of this document is illegal S - The Marketplace to Buy and Sell your Study Material (a) BROKAW CORP. Income Statement For the Year Ended December 31, 2010 Sales Revenue Net sales $1,200,000 Cost of goods sold 780,000 Gross profit 420,000 Operating Expenses Selling expenses $65,000 Administrative expenses 48,000 113,000 Income from operations 307,000 Other Revenues and Gains Dividend revenue 20,000 Interest revenue 7,000 27,000 334,000 Other Expenses and Losses Write-off of inventory due to obsolescence 80,000 Income before income tax and extraordinary item 254,000 Income tax 86,360 Income before extraordinary item 167,640 Extraordinary item Casualty loss 50,000 Less: Applicable tax reduction 17,000 33,000 Net income $ 134,640 This study source was downloaded by from CourseH on :30:42 GMT -05:00 This study resource was shared via CourseH Downloaded by: Studypool | Distribution of this document is illegal S - The Marketplace to Buy and Sell your Study Material Per share of common stock: Income before extraordinary item ($167,640 ÷ 60,000) $2.79* Extraordinary item, net of tax (0.55) Net income ($134,640 ÷ 60,000) $2.24 *Rounded This study source was downloaded by from CourseH on :30:42 GMT -05:00 This study resource was shared via CourseH Downloaded by: Studypool | Distribution of this document is illegal S - The Marketplace to Buy and Sell your Study Material (b) BROKAW CORP. Retained Earnings Statement For the Year Ended December 31, 2010 Retained earnings, Jan. 1, as reported $ 980,000 Correction for overstatement of net income in prior period (depreciation error) (net of $13,600 tax) (26,400) Retained earnings, Jan. 1, as adjusted 953,600 Add: Net income 134,640 1,088,240 Less: Dividends declared 45,000 Retained earnings, Dec. 31 $1,043,240 CA4- 5 (Earnings Management) Charlie Brown, controller for the Kelly Corporation, is preparing the company’s income statement at year-end. He notes that the company lost a considerable sum on the sale of some equipment it had decided to replace. Since the company has sold equipment routinely in the past, Brown knows the losses cannot be reported as extraordinary. He also does not want to highlight it as a material loss since he feels that will reflect poorly on him and the company. He reasons that if the company had recorded more depreciation during the assets’ lives, the losses would not be so great. Since depreciation is included among the company’s operating expenses, he wants to report the losses along with the company’s expenses, where he hopes it will not be noticed. Instructions (a) What are the ethical issues involved? (b) What should Brown do? (a) The ethical issues involved are integrity and honesty in financial reporting, full disclosure, accountant’s professionalism, and job security for Charlie.