Question

The following selected accounts are taken from Crandle Corporation’s December 31, 2016, adjusted trial balance:
Retained Earnings, January 1, 2016 .............. $428,900
Interest Expense ...................... 4,900
Depreciation Expense: Sales Equipment ............ 8,500
Advertising Expense ..................... 14,100
Common Stock, $10 par ................... 110,000
Administrative and Office Salaries Expense ........... 29,500
Dividend Revenue 900 Sales ................. 366,700
Property Tax Expense .................... 7,700
Gain on Sale of Sales Equipment (pretax) ............ 5,000
Office Supplies Expense .................. 1,800
Transportation-out (deliveries) ................. 6,000
Cost of Goods Sold ..................... 191,200
Sales Discounts Taken ................... 5,200
Bad Debt Expense ..................... 1,900
Sales Supplies Expense ................... 4,600
Sales Salaries Expense ................... 16,500
Depreciation Expense: Buildings and Office Equipment ..... 10,000
Income Tax Expense ................... 19,560
In addition to the preceding account balances, you have available the following information:
1. In the middle of December 2016, the company incurred a material $5,500 pretax loss as a result of a flood of a river that floods once every 10 years.
2. While making its December 31, 2016, adjusting entries, the company conducted an analysis of its recent favor-able experience with uncollectible accounts receivable, and decided to reduce the percentage used in computing bad debt expense. The use of the new percentage resulted in the $1,900 bad debt expense being $500 less than the amount that would have been calculated using the old percentage.
3. On April 1, 2016, the company sold Division M (a component of the company), which had been unprofitable for several years. For the first 3 months of 2016, Division M had incurred a pretax operating loss of $8,800. Division M was sold at a pretax loss of $7,500.
4. The company paid cash dividends of $0.90 per share on its common stock. All the stock was outstanding for the entire year.
5. The company is subject to a 30% income tax rate. The $19,560 Income Tax Expense account balance consists of $21,210 tax on income from continuing operations, less a $1,650 tax credit on the loss because of the flood. It does not include tax credits of $2,640 on the operating loss of Division M, or $2,250 on the loss from sale of Division M.
Required:
1. As supporting documents for Requirement 2, prepare separate schedules for selling expenses and for general and administrative expenses (include each depreciation expense where applicable in these schedules).
2. Prepare a 2016 single-step income statement for Crandle. Include any related note to the financial statements.
3. Prepare a 2016 retained earnings statement.
4. What was Crandle’s profit margin for 2016? What is your evaluation of Crandle’s 2016 profit margin if last year it was 8%?


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  • CreatedOctober 05, 2015
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