Question

P4-7 The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Income statement Corporation for the year ended December 31, 2021 ($ in thousands): sales revenue, $15,300, cost of goods sold, presentation; statement of $6,200; selling expenses. $1,300: general and administrative expenses, $800; interest revenue, $40; interest expense, $180. Income taxes have not yet been recorded. The company's income tax rate is 25% on all items comprehensive of income or loss. These revenue and expense items appear in the company's income statement every year. The income; unusual company's controller, however, has asked for your help in determining the appropriate treatment of the following Items nonrecurring transactions that also occurred during 2021 (S in thousands). All transactions are material in amount. • L04-1, L04-3 1. Investments were sold during the year at a loss of $220. Schembri also had an unrealized gain of $320 for the through L04-6 year on investments in debt securities that qualify as components of comprehensive income. 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 2021 prior to the sale, and its assets were sold at a gain of $1,400. 4. In 2021, the company's accountant discovered that depreciation expense in 2020 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 2021, including earnings per share disclosures. There were 1,000,000 shares of common stock outstanding at the beginning of the year and an additional 400,000 shares were issued on July 1, 2021. Use a multiple-step format similar to the one in the Concept Review Exercise at the end of Part A of this chapter. 2. Prepare a separate statement of comprehensive income for 2021.

Answer 1

1. Multiple-step Statement of Comprehensive Income

SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2021
($ in 000s)
Sales revenue		15300
Cost of goods sold		(6200)
Gross profit		9100
Operating expenses:
Selling expense	(1300)
General and administrative expenses	(800)
Restructuring costs	(1200)
Total operating expenses		(3300)
Operating income		5800
Other income (expense):
Loss on sales of investments	(220)
Interest expense	(180)
Interest revenue	40
Other income (expense)		(360)
Income from continuing operations before income taxes		5440
Income tax expense (25%)		1360
Income from continuing operations		4080
Discontinued operations
Income from operations of discontinued component (1400-560)	840
Income tax expense	(210)
Income from discontinued operations		630
Net income		4710
Other comprehensive income (loss)
Unrealized gains from investments, net of tax (320*(1-25%))	240
Loss from foreign currency translation, net of tax (240*(1-25%))	(180)
Total other comprehensive income		60
Comprehensive income		4770
Earnings per share:
Income from continuing operations	3.40
Income from discontinued operations	0.53
Net income	3.93

workings:

Weighted average shares = 1000000+(400000/2) = 1200000

Net income from continuing operations = 4080/1200= 3.40

Net income from discontinued operations = 630/1200 = 0.53

2.Statement of Comprehensive Income

SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2021
($ in 000s)
Net income		4710
Other comprehensive income (loss)
Unrealized gains from investments, net of tax (320*(1-25%))	240
Loss from foreign currency translation, net of tax (240*(1-25%))	(180)
Total other comprehensive income		60
Comprehensive income		4770