Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Question
Chapter 6, Problem 18PC
a.
To determine
Make discussion about the following items when earnings to forcast the future profitability of H:
- 1. Gain on sale of a portion of the branded product line.
- 2. Extraordinary loss.
b.
To determine
Explain the adjustment that can be made towards H’s net income for each item in Part a.
c.
To determine
Make discussion about the reclassification adjustment made by H for sale and promotion of incentive costs (Item 3).
d.
To determine
Prepare common-size income statement for year 10, 11, and 12.
e.
To determine
Prepare common-size income statement for year 10, 11, and 12 after making income adjustments.
f.
To determine
Make assessment of the changes in the profitability of H during three-year period.
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Henry Company is a marketer of branded foods to retail and foodservice channels. Exhibit 6.18 presents Henry’s income statements for Year 10, Year 11, and Year 12. Notes to the financial statements reveal the following information:1. Gain on sale of a portion of the branded product line. In Year 10, Henry completed the sale of a portion of one of its branded product lines for $735 million. The transaction resulted in a pretax gain of $464.5 million. The sale did not qualify as a discontinued operation. Henry did not disclose the tax effect of the gain reported in Exhibit 6.18.2. Extraordinary loss. In Year 11, Henry experienced an extraordinary loss when a subsidiary was expropriated during a military coup in a previously stable country. The loss was $17 million, net of income taxes of $10 million.
3. Sale and promotion costs. In Year 11, Henry changed the classification of certain sale and promotion incentives provided to customers and consumers. In the past, Henry classified these…
Lechon Company provided the following data for the current year:
Sales
Cost of goods sold
Expenses
Depreciation
Income tax expense
The entity has two major reportable segments, A and B. An analysis revealed that
P1,000,000 of the total depreciation expense and P2,000,000 of the expenses are related
to general corporate activities.
The remaining expenses and sales are directly allocable to segment activities according
to the following percentages:
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P60,000,000
28,000,000
14,000,000
4,000,000
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40%
35
40
40
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45%
Others
15%
15
20
15
50
40
45
What amount should be reported as net income of Segment A?
The following information relates to Sustagoon Ltd. Profit before tax for the year ended 30 June 2020 was $504,400. The following items were used in determining that profit:
Sales revenue
1,450,800
Cost of sales
608,400
Selling expenses
156,000
Administrative expenses
93,600
Other expenses
57,200
Interest expense
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Other events which occurred during the year:
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Assume the company’s taxation rate is 30c in the dollar.
Required:
Prepare a statement of profit or loss and other comprehensive income for the year ended 30 June 2020, in accordance with the requirements of AASB 101. Based on the information received determine whether to disclose by function or nature.
Ignore comparatives as the information is not provided.
Chapter 6 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
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