The following income statement items appeared on the adjusted trial balance of S
ID: 2404417 • Letter: T
Question
The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporations for the year ended December 31, 2016 ($ in 000s): Sales revenue: $15,300 Cost of goods sold: $6,200 Selling expenses: $1,300 General and administrative expenses: $800 Interest revenue: $85 Interest expense: $180 Income taxes have not yet been recorded. The company’s income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2016 ($ in 000s). All transactions are material in amount.
1. Investments were sold during the year at a loss of $220.
2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,200.
3. During the year, Schembri completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP. The division had incurred a loss from operations of $560 in 2016 prior to the sale, and its assets were sold at a gain of $1,400.
4. Foreign currency translation losses for the year totaled $240.
Prepare a 2016 multiple-step income statement for Schembri, ignoring EPS disclosures.
Explanation / Answer
Multi-step income statement Schembri Manufacturing Corporations Income Statement for the year ended December 31, 2016 Particulars Amount $ in "000" Sales 15,300 Less: Sales discounts - Net sales 15,300 Less: Cost of goods sold 6,200 Gross profit 9,100 Less: Operating expenses Selling expenses 1,300 General and administrative expenses 800 Restructuring Cost 1,200 Total Operating expenses 3,300 Income from Operations 5,800 Other Revenues and Gains Interest Revenue 85 85 Other Expenses and Losses Interest Expense 180 Loss on Sale ofInvestment 220 400 Net Other Income/ Expenses (315) Income from Continuing Operations before Income Taxes 5,485 Less: Income Tax on Continuing Operations @ 40% 2,194 Income from Continuing Operations (A) 3,291 Discontinued Operations Gain on sale of Assets 1,400 Loss from operations of Business (560) Gain from Discontinued Operations 840 Less: Income Tax @ 40% 336 Income From Discontinued Operations (B) 504 Net Income (A+B) 3,795 Other Comprehensive Income Loss from foreign currency translation (240) Comprehensive Income 3,555
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