The following income statement items appeared on the adjusted trial balance of F
ID: 2542650 • Letter: T
Question
The following income statement items appeared on the adjusted trial balance of Foxworthy Corporation for the year ended December 31, 2016 ($ in 000s): sales revenue, $23,300; cost of goods sold, $15,000; selling expenses, $2,400; general and administrative expenses, $1,300; dividend revenue from investments, $300; interest expense, $400. Income taxes have not yet been accrued. The company’s income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2016 ($ in 000s). All transactions are material in amount.
Investments were sold during the year at a loss of $400. Foxworthy also had unrealized losses of $300 for the year on investments.
During the year, Foxworthy completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP regarding discontinued operations. The division had incurred operating income of $900 in 2016 prior to the sale, and its assets were sold at a loss of $1,600.
Prepare Foxworthy’s single, continuous statement of comprehensive income for 2016, including earnings per share disclosures. Use a multiple-step income statement format. Two million shares of common stock were outstanding throughout the year. (Enter your answers in thousands of dollars, except earnings per share. Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)
The following income statement items appeared on the adjusted trial balance of Foxworthy Corporation for the year ended December 31, 2016 ($ in 000s): sales revenue, $23,300; cost of goods sold, $15,000; selling expenses, $2,400; general and administrative expenses, $1,300; dividend revenue from investments, $300; interest expense, $400. Income taxes have not yet been accrued. The company’s income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2016 ($ in 000s). All transactions are material in amount.
Explanation / Answer
SOLUTION
Foxworthy Manufacturing Corporation
Combined Statement of Income & Comprehensive Income
For the Year Ended December 31, 2016
Particulars Amount ($) Amount ($) Sales Revenue 23,300 Cost of Goods Sold 15,000 Gross Profit 8,300 Operating Expenses: Selling 2,400 Genaral & Administrative 1,300 Restructuring Costs 3,000 Total Operating Expenses 6,700 Operating Income 1,600 Other Income (Expense): Loss on Sale of Investments (400) Interest Expense (400) Dividend Revenue 300 Other Income (Expense) (500) Income from Continuing Operations before Income Taxes & Extraordinary Items 1,100 Income Tax Expense 40% (440) Income from Continuing Operations before Extraordinary Items 660 Discontinued Operations: Income from operations of Discontinued Component (including loss on disposal of $1,600) (700) Income Tax Benefit 40% 280 Loss from Discontinued Operations (420) Net Income 240 Other Comprehensive Income: Unrealized Loss from Investments (Net of $120 Tax) (180) Gain from foreign currency Translation (Net of $200 Tax) 300 120 Comprehensive Income 360 Basic Earnings per Share: Income from Continuing Operations before Extraordinary Item 0.33 Discontinued operations (0.21) Net income 0.12Related Questions
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