Question

assume that the special contract division of harris’s experienced the following transactions durikg the year ended december 31 2017.

1. prepare the special contracts division income statements for the year ended december 31,2017.

2. identify the accounting assumption or charecteristics used in accounting for items described through f.show this in preparing division income statement.

a Suppose the division provided copy services to a customer for the discounted price of $256.620. Under normal conditions, Harris's would have provided these services for $282,000. Other revenues totalled $53,000 Salaries cost the division $22,000 to provide these services. The division had to pay employees overtime. Ordinarily, the salary cost for these services would have been $19,800 Other expenses totalled $247,000. Income tax expense was 35% of income before tax Harris's has two operating divisions. Each division is accounted for separately to indicate how well each is performing. At year-end, Harris's combines the statements of divisions to show results for Harris's as a whole. Inflation affects the amounts that Harris's must pay for copy machines. To show the effects of inflation, net income would drop by $5,000. If Harris's were to go out of business, the sale of its assets would bring in $152 000 in cash Print Done

Answer 1

A The special contracts division income statement for the year ended December 31, | 2017 is as follows copy service Revenue 256620 other Revenue 53000 Total Revenue 309, 620 less operating sepenses. Salary cast (including overtime) 22000 other expenses in 247000 Total operating expenses 269000 operating profit/ 40620 less Tax 35% 14,217 I profit after tax 26 403 less Expenses due to high in Hatian. sooo - Net Income. 21403 Bu Going concern 1 The sales Revenue is made an discounted basis intending that the business cer survive in future there with the discounted price new customers in add and generate more revenue. ② salary cost and other expenses are accurred in that period. Therefore, There is a accrua assumption that salary sother expenses to be payable and not yet paid.