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Exam 4: The Income Statement and Statement of Cash Flows

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Question 31

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In the 2009 income statement for Foxtrot Co., it would report:

A) Income (loss) on its total operations for the year without separation.
B) Income (loss) on its continuing operation only.
C) Income (loss) from its continuing and discontinued operations separately.
D) Income and gains separately from losses.

E) C) and D)
F) B) and D)

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Question 32

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Briefly explain when and why intraperiod tax allocation is necessary.

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Intraperiod tax allocation associates in...

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Question 33

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List at least four operating activities that would be reported in the statement of cash flows for Wal-Mart. Assume the use of the direct method.

Scenario 2: Assume that Jacob had not yet sold the division's assets by the end of 2009. Further, assume that the fair value less costs to sell of the division's assets at 12/31/09 was $24 million and was expected to remain the same when the assets are sold in 2010. The book value of the division's assets was $19 million at the end of the year. Under these assumptions, what would Jacob report in its 2009 income statement regarding the office equipment division? Explain where this information would be presented.

In a recent press release, Foot Locker Inc. reported that its fiscal first-quarter net income fell 46% due to losses related to discontinued operations, but earnings from continuing operations jumped 19% amid a modest increase in sales. The specialty athletic retailer said net was $20 million for the quarter ended May 4, compared with net of $37 million a year earlier. The latest results included a loss of $18 million from discontinued operations. Last year, the company had earnings of $5 million, or four cents a share, from discontinued operations. Foot Locker said earnings from continuing operations were $38 million, compared with $32 million a year earlier. Discuss how Foot Locker's press release relates to its earnings quality.

Pablo purchased a lathe on January 1, 2007, at a cost of $45,000. At the time of purchase, the lathe was expected to have a five-year economic life and a residual value of $3,000. Pablo uses straight-line depreciation. At the beginning of 2009, Pablo estimated the lathe to have a remaining life of four years with no residual value. For the year ended December 31, 2009, Pablo would report depreciation of:

Bird Brain Co. reported net income of $45,000 for the year ended December 31, 2009. January 1 balances in accounts receivable and accounts payable were $23,000 and $26,000 respectively. Year-end balances in these accounts were $22,000 and $28,000, respectively. Assuming that all relevant information has been presented, Bird Brain's cash flows from operating activities would be:

Intraperiod income tax presentation is primarily a matter of:

Rowdy's would report net cash inflows (outflows) from operating activities in the amount of:

Required: Prepare a multiple-step income statement with earnings per share disclosure.

Shady Lane's income tax payable account decreased from $14 million to $12 million during 2009. If its income tax expense was $80 million, what would be shown as an operating cash flow under the direct method?

Arrow Printers paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends on its common stock. Arrow would report cash outflows from activities, as follows:

EPS disclosure is required only for income from continuing operations.

Change statements include a:

Operating cash flows would exclude:

Net income, often referred to as "the bottom line," is not always a good predictor of future income. Explain this statement.

Schneider Inc. had salaries payable of $60,000 and $90,000 at the end of 2008 and 2009, respectively. During 2009, Schneider recorded $620,000 in salaries expense in its income statement. Cash outflows for salaries in 2009 were:

Briefly explain why the income statement is referred to as a change statement.

Earnings quality refers to the ability of reported earnings (income) to predict future earnings.

Required: Prepare a single-step income statement with basic earnings per share disclosure.