Concept explainers
Income statement presentation; statement of comprehensive income; unusual items
• LO4–1, LO4–3 through LO4–6
The following income statement items appeared on the adjusted
1. Investments were sold during the year at a loss of $220. Schembri also had unrealized gains of $320 for the year on investments.
2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,200.
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 $560 in 2018 prior to the sale, and its assets were sold at a gain of $1,400.
4. In 2018, the company’s accountant discovered that depreciation expense in 2017 for the office building was understated by $200.
5. Negative foreign currency translation adjustment for the year totaled $240.
Required:
1. Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2018, including 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, 2018.
2. Prepare a separate statement of comprehensive income for 2018.
(1)
Income statement:
Income statement is one form of financial statement which reports revenues and expenses from business operations and the result of those operations are reported as net income or net loss for a particular time period.
To prepare: The single, continuous multi-step statement of comprehensive income including EPS disclosure of Corporation SM for the year ended December 31, 2018.
Explanation of Solution
Corporation SM | ||
Statement of Comprehensive Income | ||
For the year ended December 31, 2018 | ||
Particulars | Amount (in '000s) |
Amount (in '000s) |
Sales revenue | $15,300 | |
Cost of goods sold | -$6,200 | |
Gross profit | $9,100 | |
Operating expenses: | ||
Selling | $1,300 | |
General and administrative | $800 | |
Restructuring costs | $1,200 | |
Total operating expenses | -$3,300 | |
Operating income | $5,800 | |
Other income (expense): | ||
Loss on sales of investments | -$220 | |
Interest expense | -$180 | |
Interest revenue | $85 | |
Other income (expense) | -$315 | |
Income from continuing operations before income tax | $5,485 | |
Income tax expense (1) | -$2,194 | |
Income from continuing operations | $3,291 | |
Discontinued operations: | ||
Income from operationsof discontinued component (including gain on disposal of $1,400) (2) |
$840 | |
Income tax expense (3) | -$336 | |
Income on discontinued operations | $504 | |
Net income | $3,795 | |
Other comprehensive income (loss): | ||
Unrealized gains from investments, net of tax (4) | $192 | |
Loss from foreign currency translation, net of tax (5) | -$144 | |
Total other comprehensive income | $48 | |
Comprehensive income | $3,843 | |
Earnings per share: | ||
Income from continuing operations (6) | $2.74 | |
Discontinued operations (8) | -$0.42 | |
Net income | $3.16 |
Table (1)
Working Notes:
Determine the amount of income tax expense.
Determine the amount of income from operations of discontinued component.
Determine the amount of income tax expense of income from operations of discontinued component.
Determine the amount of net of tax on unrealized gains from investments.
Determine the amount of net of tax on loss from foreign currency translation.
Determine the amount of earning per share of income from continued operations.
Determine the number of common stock outstanding.
Determine the amount of earning per share of income from discontinued operations.
The net income of Corporation SM for the year ended December 31, 2018 is $3,795.
(2)
Statement of comprehensive income:
It is a statement prepared to determine the total revenue, expenses, gains and losses in the reported year that includes some unusual and extraordinary transactions that may not always affect the changes in owner’s equity.
To prepare: The statement of comprehensive income of Corporation SM for the year ended December 31, 2018.
Explanation of Solution
Corporation SM | ||
Statement of Comprehensive Income | ||
For the year ended December 31, 2018 | ||
Particulars | Amount (in '000s) | Amount (in '000s) |
Net income | $3,795 | |
Other comprehensive income (loss): | ||
Unrealized gains from investments, net of tax (1) | $192 | |
Loss from foreign currency translation, net of tax (2) | -$144 | |
Total other comprehensive income | $48 | |
Comprehensive income | $3,843 |
Table (2)
Working Notes:
Determine the amount of net of tax on unrealized gains from investments.
Determine the amount of net of tax on loss from foreign currency translation.
Thus, comprehensive income for the year ended December 31, 2018 is $3,843.
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