Question

The trial balance for Sunset Corporation, a manufacturing company, for the year ended December 31, year 1, included the following income accounts:

Account Title                                                               Debits              Credits

Sales Revenue                                                                                     $2,450,000

Cost of Goods Sold                                                     $1,200,500

Selling and Administrative expenses                          $400,000         

Interest Expense                                                         $45,500

Gain on debt securities                                                                       $88,000

The gain on debt securities is unrealized and classified as other comprehensive income. The trial balance does not include the accrual for income taxes. Sunset’s income tax rate is 25%. There were 1,000,000 shares of common stock outstanding throughout year 1.

Prepare a single, continuous multiple-step statement of comprehensive income for year 1, including appropriate EPS disclosures.       

Answer 1

Sunset Corporation Statement of Comprehensive Income For the Year Ended December 31, Year 1 Sales Revenue $2.450,000 Less: Cost of Goods Sold 1.200,500 Gross profit 1,249,500 Operating expenses: Selling and Administrative expenses 400.000 Operating income 849,500 Other income (expense): Interest Expense 45,500 Income before income taxes 804,000 Income Tax Expense 201.000 ($804.000*0.25) Net income 603,000 Other comprehensive income (net of tax): Gain on Debt Securities 66.000 Comprehensive income $531,000 Earnings per share 0.603 (5603,000/1,000,000)