In Reconciling Information to Complete Its Financial Statements, Flying High

question 95

Essay

In reconciling information to complete its financial statements, Flying High Corporation discovered the following situations:
$$\begin{array} { | l | r| } \hline \text { Income before taxes and the changes } & \$ 400,000 \\\hline \text { Income tax rate } & 35 \% \\\hline \text { Bad debt expense increased } & 1 \% \text { of sales } \\\hline \text { Sales } & \$ 900,000 \\\hline \text { Equipment original cost } & \$ 500,000 \\\hline \text { Equipment accumulated depreciation } & \$ 200,000 \\\hline \text { Method of depreciation unchanged } & \text { DDB } \\\hline \text { Remaining life changed from 5 years to } & 3 \text { years } \\\hline\end{array}$$
Required: Assuming that no depreciation had been recorded, recompute depreciation expense, bad debt expense, income before taxes, income tax expense, and net income.

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Definitions:

Compromise

The process of making mutual concessions or reaching an agreement in which each party gives up something that was originally sought.

Frederick Douglass

An American social reformer, abolitionist, orator, writer, and statesman. After escaping from slavery in Maryland, he became a national leader of the abolitionist movement.

Slavery First Hand

The direct experience or personal witnessing of the conditions and realities of slavery, typically by those who were enslaved.

Newspaper

A publication issued at regular intervals, usually daily or weekly, containing news, opinion pieces, advertisements, and other items of general interest.