The following income statement items appeared on the adjusted trial balance of S
ID: 2418330 • Letter: T
Question
The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2016 ($ in 000s): sales revenue, $19,300; cost of goods sold, $8,200; selling expenses, $1,500; general and administrative expenses, $1,000; interest revenue, $280; interest expense, $320. Income taxes have not yet been recorded. The company’s income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2016 ($ in 000s). All transactions are material in amount.
Investments were sold during the year at a loss of $420. Schembri also had unrealized gains of $530 for the year on investments.
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 $760 in 2016 prior to the sale, and its assets were sold at a gain of $1,800.
In 2016, the company’s accountant discovered that depreciation expense in 2015 for the office building was understated by $400.
Foreign currency translation losses for the year totaled $440.
Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2016, including basic earnings per share disclosures. One million shares of common stock were outstanding at the beginning of the year and an additional 400,000 shares were issued on July 1, 2016. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands. Round EPS answers to 2 decimal places.)
Prepare a separate statement of comprehensive income for 2016. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)
1.Investments were sold during the year at a loss of $420. Schembri also had unrealized gains of $530 for the year on investments.
2. One of the company’s factories was closed during the year. Restructuring costs incurred were $2,300. 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 $760 in 2016 prior to the sale, and its assets were sold at a gain of $1,800.
4.In 2016, the company’s accountant discovered that depreciation expense in 2015 for the office building was understated by $400.
5.Foreign currency translation losses for the year totaled $440.
Required: 1.Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2016, including basic earnings per share disclosures. One million shares of common stock were outstanding at the beginning of the year and an additional 400,000 shares were issued on July 1, 2016. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands. Round EPS answers to 2 decimal places.)
2.Prepare a separate statement of comprehensive income for 2016. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)
Explanation / Answer
Multi Step Income Statement for the year ending 31 December 2016 Sales 19,300 Cost of merchandise sold 8,200 Gross Profit 11,100 Operating Expenses General & Administrative Expenses 1000 Selling expenses 1500 Prior period Item(Depreciation) 400 Depreciation expense-store buildings and equipment Miscellaneous administrative expense $400 Operating Income $10,700 Other Income & Expenses Loss on sale of investments 420 Interest expense -320 Interest revenue 280 Net Other Income & Expenses 380 Income Before tax from ordinary operation $10,320 Less: Restructuring Cost ($2,300) Income Berore Tax $8,020 Income tax expense 3,208 Income from continuing operation $7,112 Income from discountinuing operation Loss from Operation -760 Gain on sale of assets 1800 Gain on Discontinoed Operation 1040 Less: Income Tax on disposal 416 Net Gain on Discontinoed Operation $624 Net Income $7,736 Other comprehensive Income Unrealized gain on Investment $530 Foreign Currency Translation Reserve ($440) Comprehensive Income $7,826 EPS from continuing Operation 7122/40000 0.178 EPS after discontinuing Operation 7736/40000 0.1934 Statement of Comprehensive Income Net Income $7,736 Unrealized gain on Investment $530 Foreign Currency Translation Reserve ($440) Total Comprehensive Income $7,826
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