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E4-8 (a)

Multiple-Step Statement with Retained Earnings Brokaw Corp. Income Statement For the Year Ended December 31, 2012 Sales Revenue Net sales Cost of goods sold Gross profit Operating Expenses Selling expenses Administrative expenses Income from operations Other Revenues and Gains Dividend revenue Interest revenue Other Expenses and Losses Write-off of inventory due to obsolescence Income before income tax and extraordinary item Income tax Income before extraordinary item Extraordinary item Casualty loss Less: Applicable tax reduction Net income Per share of common stock: Income before extraordinary item ($167,640/60,000) Extraordinary item, net of tax Net income ($134,640/60,000)

1,200,000 780,000 420,000

65,000 48,000

113,000 307,000

20,000 7,000

27,000 334,000 80,000 254,000 86,360 167,640

50,000 17,000 $

33,000 134,640

$ $

2.79 (0.55) 2.24

(b)

Brokaw Corp. Retained Earnings Statement For the Year Ended December 31, 2012 Retained earnings, January 1, as reported Correction for overstatement of net income in prior period (depreciation error - net of $13,600 tax) Retained earnings, January 1, as adjusted Add: Net income Less: Dividends declared $ $ 980,000 (26,400) 953,600 134,640 1,088,240 45,000 1,043,240

P4-1

Multiple-Step Income, Retained Earnings Dickinson Company Income Statement For the Year Ended December 31, 2012 Sales revenue Cost of goods sold Gross profit Selling and administrative expenses Income from operations Other revenues and gains Interest revenue Gain on the sale of investments Other expenses and losses Write-off of goodwill Income from continuing operations before income tax Income tax Income from continuing operations Discontinued operations Loss on operations, net of tax Loss on disposal, net of tax Income before extraordinary item Extraordinary item--loss from flood damage, net of tax Net income $ 25,000,000 16,000,000 9,000,000 4,700,000 4,300,000

70,000 110,000

180,000 820,000 3,660,000 1,244,000 2,416,000

90,000 440,000 $ $ $

530,000 1,886,000 390,000 1,496,000

Earnings per share: Income from continuing operations ($2,416,000 - $80,000)/500,000 shares Discontinued operations Loss on operations, net of tax Loss on disposal, net of tax Income before extraordinary item ($1,886,000 - $80,000)/500,000 shares Extraordinary loss, net of tax Net Income ($1,496,000 - $80,000)/500,000 shares

4.67

($0.18) (0.88)

(1.06) 3.61 (0.78) 2.83

Dickinson Company Retained Earnings Statement For the Year Ended December 31, 2012 Retained earnings, January 1 Add: Net income Less: Dividends Preferred stock $ 980,000 1,496,000 2,476,000

80,000

Common stock Retained earnings, December 31

250,000 $

330,000 2,146,000

P4-6 (a)

Retained Earnings Statement, Prior Period Adjustment Acadian Corp. Retained Earnings Statement For the Year Ended December 31, 2012 Retained earnings, January 1, as reported Correction of error from prior period (net of tax) Adjustment for change in accounting principle (net of tax) Retained earnings, January 1, as adjusted Add: Net income ($84,500 + $41,200 + $21,600 - $35,000 - $60,000) Less: Cash dividends declared Retained earnings, December 31 $ 257,600 25,400 (23,200) 259,800 52,300 32,000 280,100

(b) Gain on sale of investments Show on income statement, but not net of tax Refund on litigation with government Show on income statement as unusual item, but not net of tax Loss on discontinued operations Show on income statement after income from continuing operations Write-off of goodwill Show on income statement as unusual item, but not net of tax