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, $17,500; cost of goods sold, $7,300; selling expenses, $1,410; general and administrative expenses, $910; interest revenue, $160; interest expense, $290. Income taxes have not yet been recorded. The company’s income tax rate is 25% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2021 ($ in thousands). All transactions are material in amount.

1. Investments were sold during the year at a loss of $330. Schembri also had an unrealized gain of $400 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 $1,400.
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 $540 in 2021 prior to the sale, and its assets were sold at a gain of $1,600.
4. In 2021, the company’s accountant discovered that depreciation expense in 2020 for the office building was understated by $310.
5. Negative foreign currency translation adjustment for the year totaled $340.

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 800,000 shares were issued on July 1, 2021.
2. Prepare a separate statement of comprehensive income for 2021.

SCHEMBRI MANUFACTURING CORPORATION Statement of Comprehensive Income For the Year Ended December 31, 2021 ($ in 000s) Sales revenue $17,500 Cost of goods sold 7,300 Gross profit 10,200 Operating expenses: Selling expenses $1,410 General and administrative expenses 910 Restructuring costs 1,400 Total operating expenses 3,720 Operating income 6,480 Other income (expense): Interest revenue $160 Interest expense (290) Loss on sale of investments (330) Other income, net (460) Income from continuing operations before income taxes 6,020 Income tax expense 1,505 Income from continuing operations 4,515 Discontinued operations: Income from operations of discontinued component 1,060 Income tax expense Income on discontinued operations Net income 6,704 Other comprehensive income, net of tax: Foreign currency translation adjustment Gain on debt securities Comprehensive income Earnings per share: Income from continuing operations Income on discontinued operations Net income $

SCHEMBRI MANUFACTURING CORPORATION Statement of Comprehensive Income For the Year Ended December 31, 2021 ($ in 000s) Net income Other comprehensive income, net of tax: Gain on debt securities Foreign currency translation adjustment Total other comprehensive income 1325 Comprehensive income $5,840

Answer 1

1)
SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2013
($ in 000s)
Sales revenue		$                      17,500.00
Cost of goods sold		$                        7,300.00
Gross profit		$                      10,200.00
Operating expenses:
Selling  Expenses	$         1,410.00
General and administrative Expenses	$            910.00
Restructuring costs	$         1,400.00
Total operating expenses		$                        3,720.00
Operating income		$                        6,480.00
Other income (expense):
Loss on sales of investments	$           -330.00
Interest expense	$           -290.00
Interest revenue	$            160.00
Other income (expense)		$                          -460.00
Income from continuing operations before income taxes and extraordinary item		$                        6,020.00
Income tax expense  @ 25%		$                        1,505.00
Income from continuing operations before extraordinary item		$                        4,515.00
Discontinued operations:
Income from operations of discontinued component (including gain on disposal of $1,600) (1600 - 540)	$         1,060.00
Income tax expense	$            265.00
Income from discontinued operations		$                           795.00
Income before extraordinary item		$                        5,310.00
Extraordinary item:
Net Income		$                        5,310.00
Other comprehensive income:
Unrealized gains from investments, net of tax (400 x (1-25%)	$            300.00
Loss from foreign currency translation, net of tax (340 x (1 -25%)	$           -255.00	$                             45.00
Comprehensive income		$                        5,355.00
The depreciation expense error is a prior period adjustment (to retained earnings) and is not reported in the income statement.
Earnings per share:*
Income from continuing operations before extraordinary item	$                3.23
Discontinued operations	$                0.57
Extraordinary loss	$                    -
Net income	$                3.79
Weighted-average shares = 1,000,000 + (800,000/2) =	1,400,000.00	Shares
2)
SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2013
($ in 000s)
Net Income	$         5,310.00
Other comprehensive income:
Unrealized gains from investments, net of tax (400 x (1-25%)	$            300.00
Loss from foreign currency translation, net of tax (340 x (1 -25%)	$           -255.00
Comprehensive income	$         5,355.00