Colonel Electric Company is one of the largest and most diversified industrial corporations in the world. From the time of its incorporation in 1892, the company has engaged in developing, manufacturing, and marketing a wide variety of products for the generation, transmission, distribution, control, and utilization of electricity.

Appearing in the following table are the 2011–2013 income statements of Colonel Electric Company.

In 2013, the company earned Royalties and fees revenue of $1 billion from a one-time, six-month contract with the U.S. government. The company does not expect to do any further business with the U.S. government in the future.
1. Calculate Colonel Electric’s sustainable earnings for each year. (Although there is no consensus on how best to measure sustainable earnings, one common approach is to start with GAAP reported earnings and then eliminate unsustainable earnings items.)
2. How do Colonel Electric’s sustainable earnings compare to its reported net earnings in eachyear?

  • CreatedSeptember 10, 2014
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