Financial Statement Effects of Deferred Taxes
Tyler Corporation’s statement of operations is summarized below (dollars in thousands):
2000
1999
1998
Net sales
$357,850
$282,403
$286,206
Costs and expenses:
Cost of sales
256,195
221,024
223,826
Selling, general, and
administrative expense
103,402
57,972
55,667
Interest expense, net
3,820
487
608
Total costs and expenses
363,417
279,483
280,101
Income (loss) before income tax (benefit)
(5,567)
2,920
6,105
Income tax (benefit)
Current
(859)
2,649
4,051
Deferred
(7)
(1,067)
(1,181)
(866)
1,582
2,870
Income (loss) before cumulative changes
(4,701)
1,338
3,235
Cumulative effect of changes in
accounting principles
(3,601)
Net income (loss)
$ (4,701)
$ (2,263)
$ 3,235
Required
1. Explain the item “Income tax (benefit).” How can income tax be positive?
That is, how can income tax be deducted from income before tax in 1998 and 1999, and added in 2000?
2. Calculate the following ratios for 2000 and 1999:
a. Operating income.
b. Net income.
c. ROE. Assume that average stockholders for 2000 and 1999 are $114,000 and $117,000 (dollars in thousands). Note: You may want to take out nonrecurring items before calculating the ratios.
3. Evaluate Tyler’s performance during 1999 and 2000.
