Question

Selected information for Muffin’s Muffins Inc. for 2017 is presented below. All amounts are pretax. The effective tax rate is 30% and uses US GAAP.

Gain on sale of land                                                                                             193,400

Selling expenses                                                                                                  287,600

Accounts receivable, net                                                                                     632,900

Cumulative increase in income for reduced estimate of bad debts from

     3.5% to 2.25%                                                                                                  71,800

Sales                                                                                                                    5,130,000

Accumulated depreciation                                                                              1,526,300

Administrative expenses                                                                                      387,600

Loss from operations of discontinued line of business                                  $   365,000

Dividend Income                                                                                                    58,000

Common stock, 240,000 shares                                                                     10,172,300

Interest expense                                                                                                     144,200

Unrealized holding loss on available-for-sales securities                                   171,300

Cumulative decrease in income from change in depreciation method                 104,600

Inventory                                                                                                         3,029,000

Loss due to flooding                                                                                           293,000

Gain on disposal of discontinued line of business                                              183,200

Retained earnings, beg balance                                                                     3,067,900

Failed to recognize interest on investment in 2016                                            114,800

Foreign currency translation gain                                                                          93,700

Bonds Payable                                                                                                1,875,000

Accumulated other comprehensive income (CR bal)                                         749,120

Cumulative increase in income of change from FIFO to weighted average        63,600

Cost of goods sold                                                                                          2,905,000

Dividends declared                                                                                                 129,500

Based on the above information, answer the following questions.

Should the cumulative increase in income of change from FIFO to weighted average be reported net of tax? Why?

What amount would be reported for income from continuing operations?

What is comprehensive income for 2017?

Does the beginning balance of Retained Earnings need to be adjusted? If so, what is the adjusted amount?

On which financial statement(s) and in which section(s) would dividend income be reported?

Answer 1

Hi,

Quaestion 1: The cummulative increase in income of change from FIFO to weighted average because of there is is continue income earned by the company.

Question 2: The total income from continue operations is as fallows.

continue operation income(937,500) = continue operations income(5,475,100) - continue operations

expenses(4,537,600).

Question 3: comprehensive income(1,321,620)= Net income(572,500) - Accumulated other comprehensive income(749,120)

Quaestion 3:The adjusted retained earnings amount is net income before dividends minus neT expenses.=1,067,000

Quaestion 4: According to US gaap dividends are reported as part of income statement in the section of share holders earnings.