Question

Presented below is information relating to a public company, Doughnut Bike Company for 2019: . $1,100,000 Collections of cash from accounts receivable....... Retained earnings, January 1, 2019..... . 800,000 2,000,000 Sales ......... 290,000 Selling and administrative expenses ....... 350,000 Fire damage loss (pre-tax)........ 34,000 Cash dividends declared on common stock ..... 1,200,000 Cost of goods sold....... 460,000 Loss resulting from calculation error on depreciation expense in 2016 (pre-tax) .... 180,000 Other revenues .... 120,000 Other expenses....... 340,000 Loss from early repayment of debt (pre-tax)........... 220,000 Gain from transactions in foreign currencies (pre-tax).......... 60,000 Proceeds from sale of Doughnut Bike Company common shares... Additional information: 1. Depreciation expense of $20,000 is included in the "Selling and Administrative Expenses of $290,000. 2.On September 1, 2019, Doughnut sold one of its segments (product line) to Best Industries for a gain (pre-tax) of $550,000. During the period January 1 to August 31, this discontinued segment incurred an operating loss (pre-tax) of $480,000: this loss is not included in any of the numbers shown above. 3. Included in "Selling and Administrative Expenses" is "Bad Debts Expense" of $19,000. Required In good form, prepare Doughnut Bike Company's multiple-step income statement for 2019 on the following page. Assume a 20% income tax rate and that 20,000 common shares were outstanding during the year. Doughnut Bike Company applies IFRS.

Answer 1

Statement Showing Multisteps Income Statement As Per IFRS (IAS 1Presentation Of Financial Statements)

As Doughnut Bike company follows IFRS so we would prepare Multi step Income statement As per IAS 1

Statement Showing Multisteps Income Statement As Per IFRS (IAS 1 Presentation Of Financial Statements)

Particulars		Amount ( $ )
Sales		2000000
Less Cost of Good Sold		-1200000
Gross Profit		800000
Operating Expenses :
Selling & Administrative Expenses	(a)*251000
Bad debts	(b)* 19000
Total operating Expenses		270000
INCOME FROM OPERATIONS	Gross profit-operating Exp	530000
Non operating Income:
Other Revenues	180000 (c)
Gain from Transactions in foreign currencies	220000 (d)
Total Non Operating Income	c +d	400000
Non operating Expenses:
Depreciation	20000 *(a)
Fire Damage Loss	350000
other Expenses	120000
Loss from early repayment of debts	340000
Total Non operating Expenses	(20000+350000+120000+340000)	-830000
Income From Continuing Operation	(530000+400000-830000)	100000
Add Income from Extraordinary items	Refer point (f)	550000
Net Income Before Tax	(100000+550000)	650000
Profit (Loss) for the period from continuing operations Before Tax	650000
Loss from Discontinuing operations (before Tax)	-480000
Net profit before Tax	(650000-480000)	170000
Current Tax	@20% of 170000	-34000
Net Profit After Tax	(170000-34000)	136000
Earning per share	Net profit after tax / equity shares
	136000/20000 =	6.8

*( a) selling Exp Incudes Depreciation of 20000 and Bad debts of 19000

as deprecation is non operating exp and bed debts is operating exp

so selling And distribution exp = 290000-20000 -19000

= 251000

* (b) Selling Exp includes 19000 of bad debts

(f) gain from sale of business unit of Diego is treated as extraordinary items because its not income which is generated from continue operations , so as per Ifrs its treated as extra ordinary items , so its mentioned as income from extra ordinary items.

(G) Loss resulting from calculation error of depreciation will be set off from retained earnings