Solution CH4 Intermediate Accounting

BRIEF EXERCISES
Brief Exercise 4–1
PACIFIC SCIENTIFIC CORPORATION
Income Statement
For the Year Ended December 31, 2013
($ in millions)

Revenues and gains:
Sales ..................................................................
Gain on sale of investments .............................
Total revenues and gains ..............................

$2,106
45
2,151

Expenses and losses:
Cost of goods sold ............................................
Selling................................................................
General and administrative ...............................
Interest ...............................................................
Total expenses and losses .............................
Income before income taxes ...............................
Income tax expense* ...........................................
Net income ..........................................................

$1,240
126
105
35
1,506
645
258
$ 387

* $645 x 40% = $258

Brief Exercise 4–2
(a)

Sales revenue
$2,106
Less: Cost of goods sold
(1,240)
Gross profit
866
Less: Selling expenses
(126)
General and administrative expenses
(105)
Operating income
$ 635

(b)

Gain on sale of investments
Interest expense
Nonoperating income

45
(35)
$10

Brief Exercise 4–3

PACIFIC SCIENTIFIC CORPORATION
Income Statement
For the Year Ended December 31, 2013
($ in millions)

Sales revenue ......................................................
Cost of goods sold ...............................................
Gross profit .........................................................
Operating expenses:
Selling................................................................
General and administrative ...............................
Total operating expenses ..............................
Operating income ................................................
Other income (expense):
Gain on sale of investments .............................
Interest expense ................................................
Total other