71. During 2017, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain of $3,000,000, net of taxes, on the sale of Pine's assets. Pine's operating losses, net of taxes, were $3,500,000 in 2017. How should these facts be reported in Lopez's income statement for 2017?
Total Amount to be Included in
Income from Results of
Continuing Operations Discontinued Operations
a. $3,500,000 loss $3,000,000 gain
b. 500,000 loss 0
c. 0 500,000 loss
d. 3,000,000 gain 3,500,000 loss
72. Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of $1,392,000. It also has the following items (gross amounts).
Unusual loss $222,000
Discontinued operations loss 606,000
Gain on disposal of equipment 48,000
Change in accounting principle
increasing prior year's income 318,000
What is the amount of income tax expense Arreaga would report on its income statement?
a. $556,800
b. $487,200
c. $595,200
d. $372,000
73. Palomo Corp has a tax rate of 30 percent and income before non-operating items of $1,785,000. It also has the following items (gross amounts).
Unusual gain $ 115,000
Loss from discontinued operations 915,000
Dividend revenue 30,000
Income increasing prior
period adjustment 370,000
What is the amount of income tax expense Palomo would report on its income statement?
a. $579,000
b. $304,500
c. $415,500
d. $544,500
74. Lantos Company had a 40 percent tax rate. Given the following pre-tax amounts, what would be the income tax expense reported on the face of the income statement?
Sales revenue $ 1,000,000
Cost of goods sold 600,000
Salaries and wages expense 80,000
Depreciation expense 110,000
Dividend revenue 90,000
Utilities expense 10,000
Discontinued operations loss 100,000
Interest expense 20,000
a. $108,000
b. $68,000
c. $72,000
d. $32,000
75. In 2017, Esther Corporation reported net income of $600,000. It declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. During 2017, Esther had a weighted average of 300,000 common shares outstanding. Compute Esther's 2017 earnings per share.
a. $1.30
b. $1.50
c. $2.00
d. $2.50
76. In 2017, Linz Corporation reported a discontinued operations loss of $1,200,000, net of tax. It declared and paid preferred stock dividends of $120,000 and common stock dividends of $360,000. During 2017, Linz had a weighted average of 500,000 common shares outstanding. As a result of the discontinued operations loss, net of tax, the earnings per share would decrease by
a. $1.44
b. $1.68
c. $2.16
d. $2.40
77. In 2017, Benfer Corporation reported net income of $210,000. It declared and paid common stock dividends of $24,000 and had a weighted average of 100,000 common shares outstanding. Compute the earnings per share to the nearest cent.
a. $2.34
b. $0.48
c. $1.86
d. $2.10
78. Benedict Corporation reports the following information:
Net income $750,000
Dividends on common stock $210,000
Dividends on preferred stock $ 90,000
Weighted average common shares outstanding 250,000
Benedict should report earnings per share of
a. $1.80.
b. $2.16
c. $2.64.
d. $3.00.
79. Norling Corporation reports the following information:
Net income $750,000
Dividends on common stock $210,000
Dividends on preferred stock $ 90,000
Weighted average common shares outstanding 200,000
Norling should report earnings per share of
a. $2.25.
b. $2.70
c. $3.30.
d. $3.75.
80. Moorman Corporation reports the following information:
Correction of understatement of depreciation expense
in prior years, net of tax $ 1,290,000
Dividends declared 960,000
Net income 3,000,000
Retained earnings, 1/1/17, as reported 6,000,000
Moorman should report retained earnings, 1/1/17, as adjusted at
a. $4,710,000.
b. $6,000,000.
c. $7,290,000.
d. $9,330,000.
81. Moorman Corporation reports the following information:
Correction of understatement of depreciation expense
in prior years, net of tax $ 1,290,000
Dividends declared 960,000
Net income 3,000,000
Retained earnings, 1/1/17, as reported 6,000,000
Moorman should report retained earnings, 12/31/17, at
a. $4,710,000.
b. $6,750,000.
c. $8,040,000.
d. $9,330,000.
82. Leonard Corporation reports the following information:
Correction of overstatement of depreciation expense
in prior years, net of tax $ 645,000
Dividends declared 480,000
Net income 1,500,000
Retained earnings, 1/1/17, as reported 6,000,000
Leonard should report retained earnings, 1/1/17, as adjusted at
a. $5,355,000.
b. $6,000,000.
c. $6,645,000.
d. $7,665,000.
83. Leonard Corporation reports the following information:
Correction of overstatement of depreciation expense
in prior years, net of tax $ 645,000
Dividends declared 480,000
Net income 1,500,000
Retained earnings, 1/1/17, as reported 6,000,000
Leonard should report retained earnings, 12/31/17, at
a. $5,355,000.
b. $6,375,000.
c. $7,020,000.
d. $7,665,000.
84. The following information was extracted from the accounts of Essex Corporation at December 31, 2017:
CR(DR)
Total reported income since incorporation $4,800,000
Total cash dividends paid (2,400,000)
Unrealized holding loss on available-for-sale securities (360,000)
Total stock dividends distributed (600,000)
Prior period adjustment, recorded January 1, 2017 225,000
What should be the balance of retained earnings at December 31, 2017?
a. $1,665,000.
b. $1,800,000.
c. $2,940,000.
d. $2,025,000.
85. Madsen Company reported the following information for 2017:
Sales revenue $2,040,000
Cost of goods sold 1,400,000
Operating expenses 220,000
Unrealized holding gain on available-for-sale securities 120,000
Cash dividends received on the securities 8,000
For 2017, Madsen would report other comprehensive income of
a. $428,000.
b. $420,000.
c. $128,000.
d. $120,000.
86. Korte Company reported the following information for 2017:
Sales revenue $2,500,000
Cost of goods sold 1,750,000
Operating expenses 275,000
Unrealized holding gain on available-for-sale securities 85,000
Cash dividends received on the securities 10,000
For 2017, Korte would report comprehensive income of
a. $570,000.
b. $560,000.
c. $485,000.
d. $85,000.
87. For the year ended December 31, 2017, Transformers Inc. reported the following:
Net income $300,000
Preferred dividends declared 50,000
Common dividend declared 10,000
Unrealized holding loss, net of tax 5,000
Retained earnings 400,000
Common stock 200,000
Accumulated Other Comprehensive Income,
Beginning Balance 25,000
What would Transformers report as its ending balance of Accumulated Other
Comprehensive Income?
a. $30,000
b. $25,000
c. $20,000
d. $5,000
88. For the year ended December 31, 2017, Transformers Inc. reported the following:
Net income $300,000
Preferred dividends declared 50,000
Common dividend declared 10,000
Unrealized holding loss, net of tax 5,000
Retained earnings, beginning balance 400,000
Common stock 200,000
Accumulated Other Comprehensive Income,
Beginning Balance 25,000
What would Transformers report as the ending balance of Retained Earnings?
a. $695,000
b. $665,000
c. $640,000
d. $635,000
89. For the year ended December 31, 2017, Transformers Inc. reported the following:
Net income $300,000
Preferred dividends declared 50,000
Common dividend declared 10,000
Unrealized holding loss, net of tax 5,000
Retained earnings, beginning balance 400,000
Common stock 200,000
Accumulated Other Comprehensive Income,
Beginning Balance 25,000
What would Transformers report as total stockholders' equity?
a. $860,000
b. $840,000
c. $640,000
d. $600,000
MULTIPLE CHOICE—CPA Adapted
90. Perry Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2017, included the following expense accounts:
Accounting and legal fees $420,000
Advertising 360,000
Freight-out 225,000
Interest 180,000
Loss on sale of long-term investments 90,000
Officers' salaries 540,000
Rent for office space 540,000
Sales salaries and commissions 405,000
One-half of the rented premises is occupied by the sales department.
How much of the expenses listed above should be included in Perry's selling expenses for 2017?
a. $765,000.
b. $990,000.
c. $1,035,000.
d. $1,260,000.
91. Perry Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2017, included the following expense accounts:
Accounting and legal fees $420,000
Advertising 360,000
Freight-out 225,000
Interest 180,000
Loss on sale of long-term investments 90,000
Officers' salaries 540,000
Rent for office space 540,000
Sales salaries and commissions 405,000
One-half of the rented premises is occupied by the sales department.
How much of the expenses listed above should be included in Perry's general and administrative expenses for 2017?
a. $1,230,000.
b. $1,320,000.
c. $1,410,000.
d. $1,500,000.
92. Didde Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2017 included the following expense and loss accounts:
Accounting and legal fees $210,000
Advertising 290,000
Freight-out 120,000
Interest 105,000
Loss on sale of long-term investment 45,000
Officers' salaries 335,000
Rent for office space 330,000
Sales salaries and commissions 355,000
One-half of the rented premises is occupied by the sales department. Didde's total selling expenses for 2017 are
a. $930,000.
b. $810,000.
c. $765,000.
d. $645,000.
93. The following items were among those that were reported on Dye Co.'s income statement for the year ended December 31, 2017:
Legal and audit fees $580,000
Rent for office space 720,000
Interest on inventory floor plan 840,000
Loss on abandoned equipment used in operations 140,000
The office space is used equally by Dye's sales and accounting departments. What amount of the above-listed items should be classified as general and administrative expenses in Dye's multiple-step income statement?
a. $940,000.
b. $1,080,000.
c. $1,300,000.
d. $1,780,000.
94. Logan Corp.'s trial balance of income statement accounts for the year ended December 31, 2017 included the following:
Debit Credit
Sales revenue $280,000
Cost of goods sold $170,000
Administrative expenses 40,000
Loss on disposal of equipment 18,000
Sales commission expense 16,000
Interest revenue 10,000
Freight-out 6,000
Loss from discontinued operations 24,000
Bad debt expense 6,000
Totals $280,000 $290,000
Other information:
Logan's income tax rate is 30%. Finished goods inventory:
January 1, 2017 $160,000
December 31, 2017 140,000
On Logan's multiple-step income statement for 2017, cost of goods manufactured is
a. $196,000.
b. $190,000.
c. $156,000.
d. $150,000.
95. Logan Corp.'s trial balance of income statement accounts for the year ended December 31, 2017 included the following:
Debit Credit
Sales revenue $280,000
Cost of goods sold $170,000
Administrative expenses 40,000
Loss on disposal of equipment 18,000
Sales commission expense 16,000
Interest revenue 10,000
Freight-out 6,000
Loss from discontinued operations 24,000
Bad debt expense 6,000
Totals $280,000 $290,000
Other information:
Logan's income tax rate is 30%. Finished goods inventory:
January 1, 2017 $160,000
December 31, 2017 140,000
On Logan's multiple-step income statement for 2017, income from continuing operations is
a. $68,000.
b. $34,000.
c. $23,800.
d. $7,000.
96. Logan Corp.'s trial balance of income statement accounts for the year ended December 31, 2017 included the following:
Debit Credit
Sales revenue $280,000
Cost of goods sold $170,000
Administrative expenses 40,000
Loss on sale of equipment 18,000
Commissions to salespersons 16,000
Interest revenue 10,000
Freight-out 6,000
Loss from discontinued operations 24,000
Bad debt expense 6,000
Totals $280,000 $290,000
Other information:
Logan's income tax rate is 30%. Finished goods inventory:
January 1, 2017 $160,000
December 31, 2017 140,000
On Logan's multiple-step income statement for 2017, the discontinued operations loss is
a. $16,800.
b. $24,000.
c. $29,400.
d. $42,000.
97. Chase Corp. had the following unusual transactions during 2017:
A $450,000 gain from selling the only investment Chase has ever owned.
A $630,000 gain on the sale of equipment.
A $210,000 loss on the write-down of inventories.
In its 2017 income statement, what amount should Chase report as total unusual net gains?
a. $240,000.
b. $420,000.
c. $870,000.
d. $1,080,000.
98. James, Inc. incurred the following infrequent losses during 2017:
A $280,000 write-down of equipment leased to others.
A $160,000 adjustment of accruals on long-term contracts.
A $240,000 write-off of obsolete inventory.
In its 2017 income statement, what amount should James report as total unusual losses?
a. $680,000.
b. $520,000.
c. $440,000.
d. $400,000.
99. Which of the following should be reported as a prior period adjustment?
Change in Estimated Lives Mistakes in the Application of
of Depreciable Assets Accounting Principles
a. Yes Yes
b. No Yes
c. Yes No
d. No No
