accounting

· Individual task

· Time limit: 2 hours

· Please answer all the 3 questions below. Explain your calculations

· Income and changes in retained earnings

· Submit your assignment in an Excel document

Formalities:

· Wordcount: 1,500 words maximum

· Cover, Table of Contents, References and Appendix are excluded of the total wordcount.

· Font: Arial 12,5 pts.

· Text alignment: Justified.

· The in-text References and the Bibliography have to be in Harvard’s citation style.

Submission:

Weight: This task is a 40% of your total grade for this subject.

· Outcome 1: Critically understand the different events that imply a change in retained earnings.

· Outcome 2: Critically understand the difference between continued and discontinued operations its effect for stockholders.

· Outcome 3: Knowing how to prepare a statement of cash flows

· Outcome 4: Knowing how to calculate earning per share figures

Exercise 1: (40 points)

The company shows the following balances for certain current assets and current liabilities accounts at January 1, 2021 and December 31, 2021.

During the year, the company obtained a net income of $321,000

This net income includes the loss of $18,000 obtained in the sale of a plant asset. This asset was sold for a total price of $40,000,

Besides this, the company had recorded during year 2021 a depreciation expense of $44,000.

Also, during the year 2021 the company paid dividends for $16,000 to its stockholders and issued 6% preferred stocks for a total amount of $100,000. The preferred stocks dividends have been paid on December 31, 2021.

During year 2021, the company repaid a note payable for $29,000.

On January 1st, 2021, the balance of the cash account was $172,000

1.- Prepare a statement of cash flow separating cash flows from operating, investing and financing activities (30 points)

2.- Calculate the balance of the cash account at December 31. (10 points)

Exercise 2: (60 points)

During year 2021, Jackson Ltd. obtained an income after taxes from continuing activities of $877,000

During the month of February 2021, the company decided to sell a segment of activity. The segment generated losses before taxes prior to its disposal for $61,000.

The sale of the assets of the segment implied a gain before taxes of $10,000

In May 2021, an earthquake destroyed a facilities of the compamy causing losses for $40,000

Finally, the accountant of the company decided to change the depreciation method of the assets from double declining balance tostraight line method. This implied an additional income of $30,000

Tax rate is 25%.

1.- Prepare the income statement of the company and calculate the net income obtained in 2021 (30 points)

2.- Prepare the earning per share figure for each section of the income statement taking into account that the company had an average of 40,000 shares of common stocks outstanding throughout year 2021, and 8% preferred stocks outstanding for a total amount of $100,000. (30 points)

Rubrics