part 2 multinational accounting and other repor11 g concerns 394234

696

Required IP

Part 2 MULTINATIONAL ACCOUNTING AND OTHER REPOR11 G CONCERNS

The following additional 2014 information is available: 1. The statutory tax rate is as follows: 15% on the first $50,000 of taxable income 20/© on the next $50,000 of taxable income 25% on the next $50,000 of taxable income 30% on all additional taxable income

2. At the end of 2013, the first year of operations, the company reported a net operating loss of $80,000 and a tax credit of $5,000. At that time, the company did not recognize any of the tax benefit associated with the operating loss or tax credit. However, the company was hope ful that these benefits could be recognized in the future due to the ability to carry forward both items against future taxable income and taxes. 3. Originally, at the end of the first quarter, the company estimated pretax income for the bal ance of the year of $60,000. 4. During the second quarter, the company decided to discontinue an operation. Originally, in quarter 1, the operation had reported losses of $30,000 and projected losses for the balance. of 2014 in the amount of $40,000. During quarter 2, the discontinued operation reported operating losses of $60,000 and realized losses on the disposal of assets of $25,000. AlthOugh not yet realized, the operation anticipated that assets to be sold in the future would net $30,000 less than their book value (carrying value) as reported at the end of quarter 2, 2014. 5. During the second quarter, the company reported pretax income from continuing opera . tions of $50,000 and projected pretax income from continuing operations of $60,000 for the balance of the year. During the second quarter, the company also experienced an extraor dinary pretax gain of $20,000. Provide the value for the items A through F. Problem 12 5 (LO 3, 4) Interim income statement, expense recognition, nonor dinary income items. Treetop Corporation is a manufacturer of specialty equipment used in the film editing industry. The company needs an income statement for the second quarter of its fiscal year and has requested that you prepare such a statement. Management of the company has provided you with the following information that may be relevant to your engagement: 1. Revenues for the quarter were $510,000. The revenues are traceable to the sale of 2,100 units. 2. The company employs the LIFO inventory method for the following items: beginning inventory of 900 units at a cost of $100 per unit and purchases of 1,500 units at a cost of $120 per unit. It is anticipated that ending inventory for the fiscal year will exceed the begin ning levels of inventory. Furthermore, management anticipates that inventory acquired in the next quarter will cost approximately $124 per unit. 3. Selling, general, and administrative expenses, excluding the items in (4) through (5) belov., totaled $110,000 for the quarter. 4. During the quarter, management expended $75,000 for research and development cosr,i, which are expected to provide for new technologies in the coming fiscal year. 5. Management bonuses for the current fiscal year will be approximately $160,000 6. Based on prior experiences, it is estimated that a year end physical inventory will reveal thg the perpetual inventory is overstated. The adjustment is estimated to be in the range M $30,000. 7. During the second quarter, the company experienced two unrelated extraordinary gams and B) in the amount of $20,000 and $15,000, respectively. The company’s income tax rates are as follows: 15% on the first $50,000 of taxable incornc 25% on the next $25,000, 34% on the next $25,000, 39% on the next $230,000, and .” thereafter. In the first quarter of the fiscal year, the company reported income before taNes $20,000 and tax expense of $1,000. The company expects that for the last six months of the ft cal year there will be a pretax loss of $40,000 traceable to continuing operations. Annwl I’ credits will likely amount to $7,000.

Required ? Prepare an income statement for the second quarter of the current fiscal year. All schedules should be presented in good form.