Question

The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2021 ($ in thousands): 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, $320. Income taxes have not yet been recorded. The company’s income tax rate is 25% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2021 ($ in thousands). All transactions are material in amount.

1. Investments were sold during the year at a loss of $420. Schembri also had an unrealized gain of $540 for the 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 $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 2021 prior to the sale, and its assets were sold at a gain of $1,800.
4. In 2021, the company’s accountant discovered that depreciation expense in 2020 for the office building was understated by $400.
5. Negative foreign currency translation adjustment for the year totaled $460.

Required:
1. Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2021, 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, 2021.
2. Prepare a separate statement of comprehensive income for 2021.
  

Answer 1

Solution Preparation of Multistep Income statement and Comprehensive Income Statement Multi step Statement of Comprehensive Income Particulars Amount Amount (000's) $ 19,300 $ -8,200 $ 11,100 $ $ $ -1,500 -1,000 -2,300 Sales revenue Cost of goods sold Gross profit Operating expenses: Selling expenses General and administrative expenses Restructuring costs Total operating expenses Operating income Other income (expense): Interest expense Loss on sale of investments Interest revenue Other income, net Income from continuing operations before income taxes Income tax expense (25% tax on above) Income from continuing operations before extraordinary items $ $ -4,800 6,300 $ $ $ -320 -420 280 $ $ $ $ -460 5,840 -1,460 4,380 Discontinued operations: Income from operations of discontinued component ($1800-760) Income tax expense (Tax on above) Income on discontinued operations Net income $ $ 1,040 -260 $ $ 780 5,160 Other comprehensive income Unrealized gains from investments ($540*0.75) Loss from foreign currency translation ($460*0.75) Comprehensive Income $ $ 405 -345$ $ 60 5,220 Earnings Per Share Income from continuing Operations (4380/1200) Income from dis continuing Operations (780/1200) EPS Total $ $ $ 3.65 Per Share 0.65 Per Share 4.30 Per Share Statement of Comprehensive Income for 2021 Particulars Amount Net income Other comprehensive income Amount $ 5,160 Unrealized gains from investments ($540*0.75) $ 405 Loss from foreign currency translation ($460*0.75) -345$ 60 Comprehensive Income $ 5,220 Working Notes Otstanding shares foe EPS Calculation: in thousands (1000+400*6/12) = 1200