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, $17,900: cost of goods sold, $7,500; selling expenses. $1,430; general and administrative expenses, $930; interest revenue, $200; interest expense, $310. Income taxes have not yet been recorded. The company's income tax rate is 25% on all items of income or loss. These revenue and expense items appear in the company's income statement every year. The company's controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2021($ in thousands). All transactions are material in amount. 1. Investments were sold during the year at a loss of $350. Schembri also had an unrealized gain of $460 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 $1,600 Check my work 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 $680 in 2021 prior to the sale, and its assets were sold at a gain of $1,660. 4. In 2021, the company's accountant discovered that depreciation expense in 2020 for the office building was understated by $330. 5. Negative foreign currency translation adjustment for the year totaled $380. Required: 1. Prepare Schembri's single, continuous multiple-step statement of comprehensive income for 2021, including earnings per share disclosures.2. Prepare a separate statement of comprehensive income for 2021.

Answer 1

Answer:

A.Net income $5,155

Earning per share :-

Income from continuing operation 3.20

Income from discontinued operation 0.47

Net income 3.67

B. Comprehensive income $5,215

Step-by-step explanation:

A. Preparation of statement of comprehensive income for 2021, including earnings per share disclosures

SCHEMBRI MANUFACTURING CORPORATION

Statement of Comprehensive Income

For the Year Ended December 31, 2021

($ in 000s)

Sales revenue $17,900

Cost of goods sold ($7,500)

Gross profit $10,400

Operating expenses:

Selling expenses ($1,430)

General and administrative expenses ($930)

Restructuring costs ($1,600)

Total operating expenses ($3,960)

Operating income $6,440

(10,400-3,960)

Other income (expenses):-

Loss on sale of investment $(350)

Interest expenses $(310)

Interest revenue $200

Other income (expenses) $(460)

Income from continue operation before income tax $5,980

(6,440-460)

Income tax expenses (25%*5,980) $1,495

Income from continuing operations $4,485

(5,980-1,495)

Discontinued operation :-

Income from operation of discontinued component (1,660-680) $980

Income tax expenses $(310)

Income from discontinued operation $670

(980-310)

Net income $5,155

(4,485+670)

Other comprehensive income (loss)

Unrealized gain from investment,net of tax [460*(1-25%)] $345

Loss from foreign currency translation , net of tax [380*(1-25%)] $(285)

Total other comprehensive income $60

(345-285)

Comprehensive income $5,215

(5,155+60)

Earning per share :-

Income from continuing operation 3.20

Income from discontinued operation 0.47

Net income 3.67

Workings for Earning per share

Weighted average share = 1,000,000+(800,000/2)

Weighted average share = 1,000000+400,000

Weighted average share = 1,400,000

Net income from continue operation = 4,485/1400 = 3.20

Net income from discontinued operation = 670/1400 = 0.47

2. Preparation of a separate statement of comprehensive income for 2021.

SCHEMBRI MANUFACTURING CORPORATION

Statement of comprehensive income

For the year ended December 31,2021

Net income $5,155

(4,485+670)

Other comprehensive income (loss)

Unrealized gain from investment,net of tax [460*(1-25%)] $345

Loss from foreign currency translation , net of tax [380*(1-25%)] $(285)

Total other comprehensive income $60

(345-285)

Comprehensive income $5,215

(5,155+60)