Cases Chapter 4 - Syndicate 8

YP68C - 8th Syndicate
29122316 - Christian Hartanto

29122343 - Muhammad Milzam Abdurrahman
29122356 - Alya Raisa Khanza
Cases Chapter 4
Accounting
a) Income statement for 2015 for Counting Crows Inc.
Counting Crows Inc

Income Statement
For The Year Ended January 31, 2015
Sales
Sales Revenue £1,900,000
Cost Of Goods Sold £850,000

Gross profit £1,050,000
Expenses
Selling Expenses 300,000
Administrative Expenses 240,000
Total Operating Expenses 540,000
Total Operating Income 510,000
Other income and expense
Rent revenue 40,000
Gain on sale of investment 62,700
Income tax applicable to (2,000)

unrealized holding gain on
non-trading equity securities
Income before income tax 610,700
Income tax applicable to 187,000

continuing operations
Income from 423,700
continuing operations
Discontinued operations
Loss on discontinued (75,000)

operations
Income tax benefit 25,500

applicable to loss on
discontinued operations
Net Income £374,200
Earnings per share
Income from continuing 4,23

operations
Loss on discontinued (0,75)

operations, net of tax
Net Income £3,74
b) Retained earnings statement for 2015
Counting Crows Inc

Retained Earnings Statement
Retained Earnings, January 1, as reported £600,000
Net Income £374,200
Cash Dividends Declared (£80,000)

Retained Earnings, December 31 894,200
c) Statement of comprehensive income using the two statement format.
Counting Crows Inc

Income Statement
Sales Revenue £1,900,000
Cost Of Goods Sold £850,000
Gross profit £1,050,000

Operating Expenses £540,000
Net Income 510,000
Counting Crows Inc

Comprehensive Income Statement
Net Income 510,000
Other comprehensive income
Unrealized holding gain non-trading equity 17,000

securities, net of tax
Comprehensive income £493,000
Analysis
Explain how income statement subheads can provide useful information to financial statement
readers.
Income statement is the report that measures the success of company operations for a given
period of time. The business and investment community uses the income statement to determine
profitability, investment value, and creditworthiness. It provides investors and creditors with
information that helps them predict the amounts, timing, and uncertainty of future cash flows.
Income statement subheads provide useful information to financial statement readers by
presenting a company's financial performance over a specific period of time, such as a year or a
quarter. The subheads, such as revenue, expenses, and net income, give readers a detailed view of
how the company generates and uses its resources. For example, the revenue subhead provides
information on the sources of the company's income, while the expenses subhead gives insight into
how the company is spending its resources. The net income subhead represents the company's
overall financial performance for the period. This information can be useful for investors, creditors,
and other stakeholders who are interested in evaluating the company's financial health.
Principle
In a recent meeting with its auditor, Counting Crows’ management argued that the company should
be able to prepare a pro forma income statement, with some one-time administrative expenses
reported similar to discontinued operations. Is such reporting consistent with the qualitative
characteristics of accounting information as discussed in the Conceptual Framework? Explain.
No, such reporting is not consistent with the qualitative characteristics of accounting
information as discussed in the Conceptual Framework. The qualitative characteristics of
accounting information require that information be relevant, reliable, and comparable. Reporting
one-time administrative expenses similar to discontinued operations in a pro forma income
statement is not relevant because it may not reflect the company's ongoing operations, which is the
primary focus of the income statement. The reliability of the information may also be questionable,
as the distinction between discontinued operations and ongoing operations is important for
understanding the company's financial performance. This type of reporting may also be inconsistent
with past reporting practices, making the information less comparable over time.

Cases Chapter 4 - Syndicate 8

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YP68C - 8th Syndicate

29122316 - Christian Hartanto

a) Income statement for 2015 for Counting Crows Inc.

Counting Crows Inc

Sales Revenue £1,900,000

Cost Of Goods Sold £850,000

Selling Expenses 300,000

Administrative Expenses 240,000

Total Operating Expenses 540,000

Total Operating Income 510,000

Other income and expense

Rent revenue 40,000

Gain on sale of investment 62,700

Income tax applicable to (2,000)

Income before income tax 610,700

Income tax applicable to 187,000

Loss on discontinued (75,000)

Income tax benefit 25,500

Net Income £374,200

Earnings per share

Income from continuing 4,23

Loss on discontinued (0,75)

Net Income £3,74

b) Retained earnings statement for 2015

Counting Crows Inc

Retained Earnings, January 1, as reported £600,000

Net Income £374,200

Cash Dividends Declared (£80,000)

Counting Crows Inc

Sales Revenue £1,900,000

Cost Of Goods Sold £850,000

Gross profit £1,050,000

Counting Crows Inc

Net Income 510,000

Other comprehensive income

Unrealized holding gain non-trading equity 17,000

Comprehensive income £493,000

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