MULTIPLE CHOICE—Computational

70. Ortiz Co. had the following account balances:

Sales $ 120,000
Cost of goods sold 60,000
Salary expense 10,000
Depreciation expense 20,000
Dividend revenue 4,000
Utilities expense 8,000
Rental revenue 20,000
Interest expense 12,000
Sales returns 11,000
Advertising expense 13,000
What would Ortiz report as total revenues in a single-step income statement?
a. $133,000
b. $ 10,000
c. $144,000
d. $120,000

71. Ortiz Co. had the following account balances:

Sales $ 120,000
Cost of goods sold 60,000
Salary expense 10,000
Depreciation expense 20,000
Dividend revenue 4,000
Utilities expense 8,000
Rental revenue 20,000
Interest expense 12,000
Sales returns 11,000
Advertising expense 13,000
What would Ortiz report as total expenses in a single-step income statement?
a. $127,000
b. $134,000
c. $123,000
d. $ 63,000

72. For Mortenson Company, the following information is available:

Cost of goods sold $ 60,000
Dividend revenue 2,500
Income tax expense 6,000
Operating expenses 23,000
Sales 100,000
In Mortenson’s single-step income statement, gross profit
a. should not be reported.
b. should be reported at $13,500.
c. should be reported at $40,000.
d. should be reported at $42,500.

73. For Mortenson Company, the following information is available:

Cost of goods sold $ 60,000
Dividend revenue 2,500
Income tax expense 6,000
Operating expenses 23,000
Sales 100,000
In Mortenson’s multiple-step income statement, gross profit
a. should not be reported
b. should be reported at $13,500.
c. should be reported at $40,000.
d. should be reported at $42,500.

74. For Rondelli Company, the following information is available:

Cost of goods sold $ 90,000

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 Dividend revenue 4,000
Income tax expense 9,000
Operating expenses 35,000
Sales 150,000
In Rondelli's multiple-step income statement, gross profit
a. should not be reported
b. should be reported at $20,000.
c. should be reported at $60,000.
d. should be reported at $64,000.

75. Gross billings for merchandise sold by Lang Company to its customers last year amounted to
$15,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and
freight-out was $140,000. Net sales last year for Lang Company were
a. $15,720,000.
b. $15,350,000.
c. $15,175,000.
d. $15,035,000.

76. If plant assets of a manufacturing company are sold at a gain of $820,000 less related taxes of
$250,000, and the gain is not considered unusual or infrequent, the income statement for the period
would disclose these effects as
a. a gain of $820,000 and an increase in income tax expense of $250,000.
b. operating income net of applicable taxes, $570,000.
c. a prior period adjustment net of applicable taxes, $570,000.
d. an extraordinary item net of applicable taxes, $570,000.

77. Manning Company has the following items: write-down of inventories, $120,000; loss on disposal of
Sports Division, $185,000; and loss due to strike, $113,000. Ignoring income taxes, what total amount
should Manning Company report as extraordinary losses?
a. $ -0-.
b. $185,000.
c. $233,000.
d. $298,000.

78. Garwood Company has the following items: write-down of inventories, $240,000; loss on disposal of
Sports Division, $370,000; and loss due to an expropriation, $226,000. Ignoring income taxes, what
total amount should Garwood Company report as extraordinary losses?
a. $226,000
b. $370,000.
c. $466,000.
d. $596,000.

79. An income statement shows “income before income taxes and extraordinary items” in the amount of
$2,055,000. The income taxes payable for the year are $1,080,000, including $360,000 that is
applicable to an extraordinary gain. Thus, the “income before extraordinary items” is
a. $1,335,000.
b. $615,000.
c. $1,395,000.
d. $675,000.

80. Dole Company, with an applicable income tax rate of 30%, reported net income of $210,000. Included in
income for the period was an extraordinary loss from flood damage of $30,000 before deducting the
related tax effect. The company's income before income taxes and extraordinary items was
a. $240,000.
b. $300,000.
c. $330,000.
d. $231,000.

81. A review of the December 31, 2010, financial statements of Somer Corporation revealed that under the
caption "extraordinary losses," Somer reported a total of $515,000. Further analysis revealed that the
$515,000 in losses was comprised of the following items:

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 (1) Somer recorded a loss of $150,000 incurred in the abandonment of equipment formerly used in
the business.
(2) In an unusual and infrequent occurrence, a loss of $250,000 was sustained as a result of
hurricane damage to a warehouse.
(3) During 2010, several factories were shut down during a major strike by employees, resulting in a
loss of $85,000.
(4) Uncollectible accounts receivable of $30,000 were written off as uncollectible.
Ignoring income taxes, what amount of loss should Somer report as extraordinary on its 2010 income
statement?
a. $150,000.
b. $250,000.
c. $400,000.
d. $515,000.

Use the following information for questions 82 and 83.

At Ruth Company, events and transactions during 2010 included the following. The tax rate for all items is 30%.
(1) Depreciation for 2008 was found to be understated by $30,000.
(2) A strike by the employees of a supplier resulted in a loss of $25,000.
(3) The inventory at December 31, 2008 was overstated by $40,000.
(4) A flood destroyed a building that had a book value of $500,000. Floods are very uncommon in that
area.

82. The effect of these events and transactions on 2010 income from continuing operations net of tax would
be
a. $17,500.
b. $38,500.
c. $66,500.
d. $416,500.
83. The effect of these events and transactions on 2010 net income net of tax would be
a. $17,500.
b. $367,500.
c. $388,500.
d. $416,500.

84. During 2010, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez
realized a gain of $1,200,000, net of taxes, on the sale of Pine's assets. Pine's operating losses, net of
taxes, were $1,400,000 in 2010. How should these facts be reported in Lopez's income statement for
2010?
Total Amount to be Included in
Income from Results of
Continuing Operations Discontinued Operations
a. $1,400,000 loss $1,200,000 gain
b. 200,000 loss 0
c. 0 200,000 loss
d. 1,200,000 gain 1,400,000 loss

85. Sandstrom Corporation has an extraordinary loss of $50,000, an unusual gain of $35,000, and a tax rate
of 40%. At what amount should Sandstrom report each item?
Extraordinary loss Unusual gain
a. $(50,000) $35,000
b. (50,000) 21,000
c. (30,000) 35,000
d. (30,000) 21,000

86. Prophet Corporation has an extraordinary loss of $200,000, an unusual gain of $140,000, and a tax rate
of 40%. At what amount should Prophet report each item?
Extraordinary loss Unusual gain
a. $(200,000) $140,000
b. (200,000) 84,000
c. (120,000) 140,000
d. (120,000) 84,000

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87. Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of $232,000. It also
has the following items (gross amounts).
Unusual loss $ 37,000
Extraordinary loss 101,000
Gain on disposal of equipment 8,000
Change in accounting principle
increasing prior year's income 53,000
What is the amount of income tax expense Arreaga would report on its income statement?
a. $92,800
b. $81,200
c. $99,200
d. $62,000

88. Palomo Corp has a tax rate of 30 percent and income before non-operating items of $357,000. It also
has the following items (gross amounts).
Unusual gain $ 23,000
Loss from discontinued operations 183,000
Dividend revenue 6,000
Income increasing prior
period adjustment 74,000
What is the amount of income tax expense Palomo would report on its income statement?
a. $115,800
b. $ 60,900
c. $ 83,100
d. $108,900

89. 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 $ 100,000
Cost of goods sold 60,000
Salary expense 8,000
Depreciation expense 11,000
Dividend revenue 9,000
Utilities expense 1,000
Extraordinary loss 10,000
Interest expense 2,000
a. $10,800
b. $ 6,800
c. $ 7,200
d. $ 3,200

90. In 2010, Esther Corporation reported net income of $1,000,000. It declared and paid preferred stock
dividends of $250,000 and common stock dividends of $100,000. During 2010, Esther had a weighted
average of 200,000 common shares outstanding. Compute Esther's 2010 earnings per share.
a. $3.25
b. $3.75
c. $5.00
d. $6.25

91. In 2010, Linz Corporation reported an extraordinary loss of $1,000,000, net of tax. It declared and paid
preferred stock dividends of $100,000 and common stock dividends of $300,000. During 2010, Linz had
a weighted average of 200,000 common shares outstanding. Compute the effect of the extraordinary loss, net
of tax, on earnings per share.
a. $3.00
b. $3.50
c. $4.50
d. $5.00

92. In 2010, Benfer Corporation reported net income of $350,000. It declared and paid common stock
dividends of $40,000 and had a weighted average of 70,000 common shares outstanding. Compute the
earnings per share to the nearest cent.
a. $4.43
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 b. $3.50
c. $4.50
d. $5.00

93. Benedict Corporation reports the following information:

Net income $500,000
Dividends on common stock 140,000
Dividends on preferred stock 60,000
Weighted average common shares outstanding 100,000
Benedict should report earnings per share of
a. $3.00.
b. $3.60
c. $4.40.
d. $5.00.

94. Norling Corporation reports the following information:

Net income $500,000
Dividends on common stock 140,000
Dividends on preferred stock 60,000
Weighted average common shares outstanding 200,000
Norling should report earnings per share of
a. $1.50.
b. $1.80
c. $2.20.
d. $2.50.

95. Moorman Corporation reports the following information:

Correction of understatement of depreciation expense
in prior years, net of tax $ 430,000
Dividends declared 320,000
Net income 1,000,000
Retained earnings, 1/1/10, as reported 2,000,000
Moorman should report retained earnings, 1/1/10, as adjusted at
a. $1,570,000.
b. $2,000,000.
c. $2,430,000.
d. $3,110,000.

96. Moorman Corporation reports the following information:

Correction of understatement of depreciation expense
in prior years, net of tax $ 430,000
Dividends declared 320,000
Net income 1,000,000
Retained earnings, 1/1/10, as reported 2,000,000
Moorman should report retained earnings, 12/31/10, as adjusted at
a. $1,570,000.
b. $2,250,000.
c. $2,680,000.
d. $3,110,000.

97. Leonard Corporation reports the following information:

Correction of overstatement of depreciation expense
in prior years, net of tax $ 215,000
Dividends declared 160,000
Net income 500,000
Retained earnings, 1/1/10, as reported 1,000,000
Leonard should report retained earnings, 1/1/10, as adjusted at
a. $785,000.
b. $1,000,000.
c. $1,215,000.
d. $1,555,000.

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 98. Leonard Corporation reports the following information:
Correction of overstatement of depreciation expense
in prior years, net of tax $ 215,000
Dividends declared 160,000
Net income 500,000
Retained earnings, 1/1/10, as reported 1,000,000
Leonard should report retained earnings, 12/31/10, at
a. $785,000.
b. $1,125,000.
c. $1,340,000.
d. $1,555,000.
99. The following information was extracted from the accounts of Essex Corporation at December 31, 2010:
CR(DR)
Total reported income since incorporation $1,700,000
Total cash dividends paid (800,000)
Unrealized holding loss (120,000)
Total stock dividends distributed (200,000)
Prior period adjustment, recorded January 1, 2010 75,000
What should be the balance of retained earnings at December 31, 2010?
a. $655,000.
b. $700,000.
c. $580,000.
d. $775,000.

100. Madsen Company reported the following information for 2010:

Sales revenue $510,000
Cost of goods sold 350,000
Operating expenses 55,000
Unrealized holding gain on available-for-sale securities 40,000
Cash dividends received on the securities 2,000
For 2010, Madsen would report other comprehensive income of
a. $137,000.
b. $135,000.
c. $42,000.
d. $40,000.
101. Korte Company reported the following information for 2010:
Sales revenue $500,000
Cost of goods sold 350,000
Operating expenses 55,000
Unrealized holding gain on available-for-sale securities 20,000
Cash dividends received on the securities 2,000
For 2010, Korte would report comprehensive income of
a. $117,000.
b. $115,000.
c. $97,000.
d. $20,000.

102. For the year ended December 31, 2010, Transformers Inc. reported the following:
Net income $ 60,000
Preferred dividends declared 10,000
Common dividend declared 2,000
Unrealized holding loss, net of tax 1,000
Retained earnings 80,000
Common stock 40,000
Accumulated Other Comprehensive Income,
Beginning Balance 5,000
What would Transformers report as its ending balance of Accumulated Other
Comprehensive Income?
a. $6,000
b. $5,000
c. $4,000
d. $1,000
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103. For the year ended December 31, 2010, Transformers Inc. reported the following:
Net income $ 60,000
Preferred dividends declared 10,000
Common dividend declared 2,000
Unrealized holding loss, net of tax 1,000
Retained earnings, beginning balance 80,000
Common stock 40,000
Accumulated Other Comprehensive Income,
Beginning Balance 5,000
What would Transformers report as the ending balance of Retained Earnings?
a. $139,000
b. $133,000
c. $128,000
d. $127,000

104. For the year ended December 31, 2010, Transformers Inc. reported the following:
Net income $ 60,000
Preferred dividends declared 10,000
Common dividend declared 2,000
Unrealized holding loss, net of tax 1,000
Retained earnings, beginning balance 80,000
Common stock 40,000
Accumulated Other Comprehensive Income,
Beginning Balance 5,000
What would Transformers report as total stockholders' equity?
a. $172,000
b. $168,000
c. $128,000
d. $120,000

Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
70. a 76. a 82. a 88. a 94. c 100. d
71. c 77. a 83. b 89. a 95. a 101 a
72. a 78. a 84. c 90. b 96. b 102 c
73. c 79. a 85. c 91. d 97. c 103 c
74. c 80. c 86. c 92. d 98. d 104 a
75. c 81. b 87. b 93. c 99. d