The following income statement items appeared on the adjusted trial balance of S
ID: 2778698 • Letter: T
Question
The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2013 ($ in 000s): sales revenue, $17,300; cost of goods sold, $7,200; selling expenses, $1,400; general and administrative expenses, $900; interest revenue, $150; interest expense, $250. Income taxes have not yet been accrued. The company’s income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2013 ($ in 000s). All transactions are material in amount.
Investments were sold during the year at a loss of $320. Schembri also had unrealized gains of $420 for the year on investments.
An earthquake destroyed a warehouse causing $1,000 in damages. The event is considered to be unusual and infrequent.
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 $660 in 2013 prior to the sale, and its assets were sold at a gain of $1,600.
In 2013, the company’s accountant discovered that depreciation expense in 2012 for the office building was understated by $300.
Prepare Schembri’s combined statement of income and comprehensive income for 2013, 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, 2013. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands except earnings per share. Round EPS answers to 2 decimal places.)
1.Investments were sold during the year at a loss of $320. Schembri also had unrealized gains of $420 for the year on investments.
2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,300. 3.An earthquake destroyed a warehouse causing $1,000 in damages. The event is considered to be unusual and infrequent.
4.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 $660 in 2013 prior to the sale, and its assets were sold at a gain of $1,600.
5.In 2013, the company’s accountant discovered that depreciation expense in 2012 for the office building was understated by $300.
6. Foreign currency translation losses for the year totaled $320.Explanation / Answer
Income Statement for the year ended December 31, 2013 Sales Revenue 17300 (in "000s) Less : Cost of goods sold 7200 Gross Margin 10100 Less : Operating expenses: Selling expenses 1400 Gen.& Admn. Exp. 900 2300 Net Opertaing income 7800 Less: Non-Operating items: Interest expenses 250 Interest Revenue -150 100 Net income for the year 7700 Less: Special items of loss/gain Realised loss on sale of Investments 320 Restructuring costs of factory 1300 Abnormal earthquake loss 1000 Net gain on sale of division(1600-660) -940 Prior year depn. Under stated 300 Realised loss on foreign currency trans. 320 2300 Net Income before tax 5400 Income tax @ 40% 2160 Net Income after tax 3240 No.of shares o/s as on Dec 31 1400000 EPS= 3240/1400000= 0.002314 ie. $ 2.314
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