Question

Milwaukee Manufacturing Company presents the following partial list of account balances, after adjustments, as of December 31, 2016:
The following information is also available but is not reflected in the preceding accounts:
a. The company sold Division E (a major component of the company) on August 2, 2016. During 2016, Division E had incurred a pretax loss from operations of $16,000. However, because the acquiring company could vertically integrate Division E into its facilities, Milwaukee Manufacturing was able to recognize a $42,000 pretax gain on the sale.
b. On January 2, 2016, without warning, a foreign country expropriated a factory of Milwaukee Manufacturing which had been operating in that country. As a result of that expropriation, the company has incurred a pretax loss of $30,000.
c. The common stock was outstanding for the entire year. A cash dividend of $1.20 per share was declared and paid in 2016.
d. The 2016 income tax expense totals $31,050 and consists of the following:
Tax expense on income from continuing operations .... $32,250
Tax credit on Division E operating loss ......... (4,800)
Tax expense on gain from sole of Division E ......... 12,600
Tax credit on loss from expropriation ........... (9,000)
$31,050
Required:
1. As supporting documents for Requirement 2, prepare separate supporting schedules for selling expenses and for general and administrative expenses (include depreciation expense where applicable in these schedules).
2. Prepare a 2016 multiple-step income statement for Milwaukee Manufacturing.
3. Prepare a 2016 retained earnings statement.
4. What was Milwaukee Manufacturing's return on common equity for 2016 if its average shareholders' equity during 2016 was $500,000? What is your evaluation of this return on common equity if its "target" for 2016 was 15%?
5. Discuss how Milwaukee Manufacturing's income statement in Requirement 2 might be different if it used IFRS.


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  • CreatedOctober 05, 2015
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