1. Why might a company report income differently for internal and external users? Is this ethical?
2. How is return on investment for a division determined? Why is this information important?
3. What is the Du Pont method for calculating return on investment? What is the advantage of this method?
These accounts are from the Decker Company. Show how this information is presented on a multistep income statement.
Cost of goods sold $110,000
Selling expenses 75,000
Administrative expenses 55,000
Depreciation expense 40,000
Loss on sale of equipment 18,000
Sales returns 10,000
Hora Sporting Goods decided to sell its children’s toy division during 2010. The following relevant information is available. Use this information to determine the income (loss) from operations of the division and the income (loss) upon disposal of the division.
Gain from operations of toy division $800,000
Loss on disposal of toy division 500,000
Effective tax rate 30%