Question

The trial balance of Scan House, Inc. included the following selected accounts as of December 31, 2020: Debits Credits Sales Revenue 16,755,000
Interest Revenue 75,000 Gain on sale of investments 150,000 Unrealized gains on investments 200,000 Other Income * 1,200,000 Foreign currency translation losses 125,000 Cost of Goods Sold 11,635,000
Selling expenses 975,000 Goodwill impairment loss 550,000 Interest Expense 60,000 Administrative Expense** 780,000 Loss on sale of land 225,000 Dividends declared 175,000   
Additional information:

* Other Income consists of income from discontinued operations. This includes $900,000 of income from operations and a $300,000 gain on the sale of investments.
** Administrative expense includes a $150,000 expense that was a correction of an error made in the 2018 Income Statement, but discovered during 2020.
Retained Earnings balance: January 1, 2020 = $725,000.
ScanHouse had 600,000 shares of common stock outstanding throughout the year and 1,000,000 shares of common stock authorized. Income tax expense had not yet been accrued. The effective tax rate is 21%.

Required: 1. Prepare a single, continuous 2020 statement of comprehensive income for Scan House, Inc., including income tax expense and Earnings Per Share (EPS). Use a multiple-step income

2. Prepare a 2020 statement of retained earnings for Scan House, Inc.

Answer 1

1. Statement of comprehensive income for the year 2020 for Scan House Inc.

Particulars	Amount ($)	Amount ($)
Sales Revenue	16,755,000
Interest Revenue	75,000
Gain on sale of investments	150,000
Other income	1,200,000
Total Revenue		18,180,000
Less: Cost of goods sold		(11,635,000)
Gross Profit		6,545,000
Operating expenses
Selling expenses	975,000
Administrative expenses	630,000
Interest expenses	60,000	(1,665,000)
Income from continuing operations before income taxes		4,880,000
Less: Goodwill Impairment loss	(550,000)
Less: Loss on sale of land	(225,000)	(775,000)
Income before income taxes		4,105,000
Income taxes (21%)		862,050
Income from continuing operations		3,242,950
Discontinued Operations
Income from operations	900,000
Gain on sale of investments	300,000
Less: Income tax (21%)	(252,000)
Gain on discontinued operations		948,000
Net income/earnings		4,190,950
Other comprehensive income
Unrealised gain on investments	200,000
Less: Foreign currency translation loss	(125,000)	75,000
Comprehensive Income		4,265,950
Earnings per share (Total earnings/outstanding shares)		6.985

Administrative expense = 780,000 - 150,000 =$630,000

EPS = 4,190,950 / 600,000 = 6.985

2.  Statement of retained earnings for Scan House, Inc. for the year 2020

Retained Earnings at the beginning of the period	$ 725,000
Add: Net income	$ 4,190,950
Less: Administrative expense of 2018 (error)	$ 150,000
Less: Dividends declared	$ 175,000
Retained earnings at the end of the period	$ 4,590,950