Milwaukee Manufacturing Company presents the following partial list of account
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)
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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