Problem 4-7 Income statement presentation; statement of comprehensive income; un

Question

Problem 4-7 Income statement presentation; statement of comprehensive income; unusual items [LO4-1, 4-3, 4-4, 4-5, 4-6, 4-7]

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, $18,100; cost of goods sold, $7,600; selling expenses, $1,440; general and administrative expenses, $940; interest revenue, $200; interest expense, $300. Income taxes have not yet been accrued. The company

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, $18,100; cost of goods sold, $7,600; selling expenses, $1,440; general and administrative expenses, $940; interest revenue, $200; interest expense, $300. Income taxes have not yet been accrued. The company

Explanation / Answer

The following income statement items appeared on the adjusted trial balance of Foxworthy Corporation for the year ended December 31, 2009 ($ in 000s): sales revenue, $22,300; cost of goods sold, $14,500; selling expenses, $2,300; general and administrative expenses, $1,200; dividend revenue from investments, $200; interest expense, $300. Income taxes have not yet been accrued. The company's income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company's income statement every year. The company's controller, however, has asked for your help in determining the appropriate treatment of the following non-recurring transactions that also occurred during 2009 ($ in 000s). All transactions are material in amount.

1. Investments were sold during the year at a loss of $300. Foxworthy also had unrealized losses of $200 for the year on investments accounted for as securities available for sale.
2. One of the company's factories was closed during the year. Restructuring costs incurred were $2,000.
3. One of Foxworthy's manufacturing facilities located in a foreign country was expropriated. A loss of $800 was recognized. The event is considered to be unusual and infrequent.
4. During the year, Foxworthy completed the sale of one of its operating divisions that qualifies as a component of the entity according to SFAS No. 144. The division had incurred operating income of $800 in 2009 prior to the sale, and its assets were sold at a loss of $1,800.
5. In 2009, the company's accountant discovered that depreciation expense in 2008 for the office building was overstated by $300.
6. Foreign currency translation gains for the year totaled $600.
Required: Prepare Foxworthy's combined statement of income and comprehensive income for 2009, including basic earnings per share disclosures. Two million shares of common stock were outstanding throughout the year.

Please see the attached excel sheet

A. Preferred dividends are subtracted from earnings when computing earnings per share whether or not the dividends are declared or paid if the preferred stock is?

Cumulative

B-Preferred dividends would not be subtracted from earnings when computing earnings per share in a year when the dividends are not declared if the preferred stock is?

Noncumulative

C- Ignatius Corporation had 7 million shares of common stock outstanding during the current calendar year. It issued ten thousand, $1,000, convertible bonds on January 1. On June 30, Ignatius issued 100,000 shares of $100 par 6% cumulative preferred stock. Dividends are declared and paid semiannually. The bonds were issued at face amount and pay interest quarterly at an annual rate of 10%. Each bond is convertible into 50 shares of common stock. Ignatius has an effective tax rate of 40%. Determine Ignatius Basic and diluted EPS related to $20 million net income.

Diluted EPS: [$20,000,000 - $300,000 + (1,000,000 x .6)]/7,000,000 + (10,000 x 50) = $2.71

D-Martin Corp. permits any of its employees to buy shares directly from the company through payroll deduction. There are no brokerage fees and shares can be purchased at a 10% discount. During 2009, employees purchased 8 million shares; during this same period, the shares had an average market price of $15 per share. Martin's 2009 pretax earnings will be reduced by

$12 million

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