100. (CMA adapted, Dec 95 #5) The conceptual framework of accounting theory governs the recognition of revenue and expenses. Revenue is generally recognized at the point of sale; however, under special circumstances, bases other than the point of sale are used for the recognition of revenue. Costs are generally recognized as expenses at the time of product sale; however, there are guidelines for recognizing expenses by other criteria. Accountants must be familiar with these concepts when determining the earnings of a company.
Required:
101. Ralston Company has two divisions, X and Y. The operations and cash flows of these two divisions are clearly distinguishable. On July 1, 2014, the company decided to dispose of the assets and liabilities of Division Y. It is probable that the disposal will be completed early next year. The revenues and expenses of Ralston Company for 2014 and for the preceding two years are as follows:
2014
2013
2012
Sales-Division X20,00018,40017,000
Sales-Division Y15,00016,20018,000
Total non tax expenses-X14,00016,20015,000
Total non tax expenses-Y15,90015,00015,400
During the latter part of 2014, Ralston disposed of a portion of Division Y and recognized a pretax loss of $8,000 on the disposal. The income tax rate for Ralston Company is 40%.
Prepare the comparative income statements for Ralston Company for the years 2012, 2013, and 2014.