Nama : AULIA KHAIRANI

Nim : 4112101092
Kelas : AM2C - Reguler Pagi

a) Prepare a comprehensive income statement using the combined statement

approach.
WEATHERSPOON SHOE CO.
Income Statement
For The Year Ended December 31, 2015

Net Sales £ 980,000

Cost Of Goods Sold £ 516,000
Gross Profit £ 464,000

Selling Expenses £ 140,000

Administrative Expenses £ 181,000 £ 321,000
£ 143,000
Other Income and Expense
Rental Revenue £ 29,000
Loss on sale of plant assets £ 15,000 £ 14,000
Income from operations £ 157,000
Interest expense £ 18,000
Income before income tax £ 139,000
Income tax £ 30,600
Net income £ 108,400
Other comprehensive income
Unrealized gain on securities , net of tax £ 31,000
Comprehensive income £ 139,400

b) Prepare a comprehensive income statement using the two statement approach.

WEATHERSPOON SHOE CO
Income Statement
For The Year Ended December 31,2015

Net Sales £ 980,000

Cost of goods sold £ 516,000
Gross profit £ 464,000
Selling expensive £ 140,000

Administrative expense £ 181,000 £ 321,000

£ 143,000
Other income and expense
Rental revenue £ 29,000
Loss on sale of plant assets £ 15,000 £ 14,000
Income from operations £ 157,000
Interest expense £ 18,000
Income before income tax £ 139,000
Income tax £ 30,600
Net Income £ 108,400

WEATHERSPOON SHOE CO
Income Statement
For The Year Ended December 31,2015

Net Income £ 108,400

Other comprehensive income
Unrealized gain on securities, net of tax £ 31,000
Comprehensive income £ 139,400

c) Which format do you prefer? Discuss.

The combined statement has the advantage of not equiring the creation
of a new financial statement. However, burying net income as a subtotal
on the statement is considered a disadvantage
a) What is Zehms’s net income in 2015? Assume a 35% tax rate in all years.
2015
Income before income tax $ 460,000
Income tax (35%) $ 161,000
Net income $ 299,000

b) Compute the cumulative effect of the change in accounting principle from weighted-
average to FIFO inventory pricing
Weighted Tax Rate
Year FIFO Difference Net Effect
Average 35%
2013 $ 370,000 $ 395,000 $ 25,000 $ 8,750 $ 16,250
2014 $ 390,000 $ 420,000 $ 30,000 $ 10,500 $ 19,500
$ 55,000 $ 19,250 $ 35,750

c) how comparative income statements for Zehms Company, beginning with income
before income
tax, as presented on the 2015 income statement.
2013 2014 2015
Income before income tax $ 395,000 $ 420,000 $ 460,000
Income tax 35% $ 138,250 $ 147,000 $ 161,000
Net income $ 256,750 $ 273,000 $ 299,000
a) Prepare a corrected retained earnings statement. (Ignore income tax effects.)
FIFO inventory was used in 2015 to compute net income.

ACADIAN CORP.
Retained Earning Statement
For the Year Ended December 31, 2015
Retained earnings, January 1, as reported $ 257,600
Correction of error from prior period $ 25,400
Adjustment for change in accounting principle $ -23,200
Retained earnings, January 1, as adjusted $ 259,800
Add : Net income $ 52,300
Less : Cash dividends declared $ 32,000
Retained earnings, Decemmber 31 $ 280,100

52.300 = 84.500 + 41.200 + 21.600 - 35.000 - 60.000

b) State where the items that do not appear in the corrected retained earnings
statement should be shown.

1. Gain on sale of investments -> body of income statement. This gain should be
shown under other income and expense on the income statement.
2. Refund on litigation with government -> body of income statement. This refund
should be shown under other income and expense on the income statement.
3. Loss on discontinued operations -> body of the income statement, following the
caption, Income from continuing operations.
4. Write off of goodwill -> body of income statement. The write-off should be
shown under other income and expense on the income statement.