Intermediate Accounting-I Assignment 1 Solution for Bremeur Corp.

This document presents the complete solutions for Intermediate Accounting-I Assignment 1. The assignment covers three key areas of financial accounting. Question 1 focuses on the preparation of a comprehensive income statement for Bremeur Corporation, including the calculation of earnings per ...Read More

Q-1. (Chapter-3): A3-3 Income Statement Format:
Bremeur Corporation
Statement of comprehensive income
For the year Ending December 31, 2015
Particulars Amount Amount
Sales for continuing operations
$
695,200.00
Cost of Goods Sold
$
(330,000.00)
Gross Profit
$
365,200.00
Less: Operating Expenses
Distribution expenses
$
(136,000.00
)
General and administrative expenses
$
(110,000.00
)
Depreciation and amortization
$
(6,000.00)
Total operating expenses
$
(252,000.00)
Add/(Less): Other income/(Other Expenses)
Rent Revenue
$
2,400.00
Interest revenue
$
900.00
Gain on sale of investment
$
2,000.00
Total Other income/(Other Expenses)
$
5,300.00
Profit Before interest and tax expense
$
118,500.00
Less: Interest expenses
$
1,500.00
Profit after interest and before taxes
$
117,000.00
Less: Tax @ 20%
$
23,400.00
Net Income after taxes from continuing
Operations
$
93,600.00

Discontinued Operations
Revenue in business segment being
discontinued
$
75,000.00
Operating expenses
$
(78,000.00)
Asset impairment
$
(12,000.00)
Loss on discontinued operations
$
(15,000.00)
Extraordinary Items
Settlement of legal claim against the
company
$
(10,000.00)
Net income/Earnings/Comprehensive
Income
$
68,600.00
Earnings per share
Income from continuing operations
$
2.40
Discontinued operations
$
(0.38)
Income before extraordinary items
$
2.02
Extraordinary Items
$
(0.26)
Net Income
$
1.76
(Davies & Crawford, 2011)
Q-2. (Chapter 4): A4-12 Error Correction
Position in book of accounts (Before errors have been found)
Income Statement of Butch Baking Corporation
Financial Items 2012 2013
Net Income Before income taxes
$
3,500,000.00
$
4,400,000.00
Less: Taxes @ 30%
$
1,050,000.00
$
1,320,000.00
Net Income after income taxes
$
2,450,000.00
$
3,080,000.00
Impact on the income statement after errors have been located

Income Statement of Butch Baking Corporation
Financial Items 2012 2013
Old Net Income after taxes
$
2,450,000.00
$
3,080,000.00
Adjustments of depreciation
Add: Cost of equipment
$
1,200,000.00 0
Less: Depreciation on equipment
$
(120,000.00)
$
(120,000.00)
New Net income before tax adjustments
$
3,530,000.00
$
2,960,000.00
Adjustments of taxes
Less: Tax underapplied on cost of
equipment
$
(360,000.00)
Add: Tax on depreciation
$
36,000.00
$
36,000.00
New Net income after tax
adjustments
$
3,206,000.00
$
2,996,000.00
Impact on Net Income after taxes
Profit
underapplied
by
Profit
overapplied by
$
756,000.00
$
(84,000.00)
Q-3. (Chapter-7) A7-4: Accounts Receivable—Allowances:
Part 1 Year End Adjusting Entries in respect of Account Receivables
Accounts Debit Credit
Bad Debt Expenses Account
$
97,600.00
Allowance for doubtful account
$
97,600.00
(Additional bad debt reported at the year end
$280000-$182400)
Allowance for doubtful account
$
280,000.00
Accounting Receivables account
$
280,000.00
($280000 was uncollectible and it requires
accounts receivables to be written off)

Discount Allowed Expenses
$
800.00
Allowance for sales discounts account
$
800.00
(Increase in allowances for sales discount as it
was recorded last year)
Part 2 Particulars Amount Amount
Gross Account Receivables
$
2,481,800.00
Less: Allowance for sales discounts account
$
30,600.00
Less: Allowance for doubtful account
$
280,000.00
Net Account Receivables
$
2,171,200.00
(Damodaran, 2011)

References
Damodaran, A, (2011). Applied corporate finance. USA: John Wiley & sons.
Davies, T. & Crawford, I., (2011). Business accounting and finance. USA: Pearson.