The following income statement items appeared on the adjusted trial balance of S
ID: 2418331 • 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.
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.
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.)
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.)
Explanation / Answer
Income Statement as on 31st December 16 (IN '000) Sales revenue 19300 Less Cost of goods sold 8200 Gross profit 11100 Less Admin & general expense 1000 Selling expense 1500 Loss on sale of Investment 420 Restructuring cost 2300 Prior period expense (dep understated) 400 Interest expense 320 5940 Add Gains on discontinued operations 1040 Interest earned 280 1320 Earnings before Taxes 6480 Less Taxes @ 40% 2592 Net Income 3888 Other comprehensive Income Unrealised gains on investments, net of tax 318 Foreign currency loss, net of tax -264 Other comprehensive Income, net of Tax 54 Total comprehensive Income of the year 3942
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