Question

The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2018 ($ in 000s): sales revenue, $17,100; cost of goods sold, $7,100; selling expenses, $1,390; general and administrative expenses, $890; interest revenue, $160; interest expense, $210. Income taxes have not yet been recorded. The company’s income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2018 ($ in 000s). All transactions are material in amount.

Investments were sold during the year at a loss of $310. Schembri also had unrealized gains of $400 for the year on investments.

One of the company’s factories was closed during the year. Restructuring costs incurred were $2,100.

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 $620 in 2018 prior to the sale, and its assets were sold at a gain of $1,580.

In 2018, the company’s accountant discovered that depreciation expense in 2017 for the office building was understated by $290.

Negative foreign currency translation adjustment for the year totaled $330.

Required:
1. Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2018, 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, 2018.
2. Prepare a separate statement of comprehensive income for 2018.

Answer 1

Schembri Manufacturing Corporation
Required 1)   SCHEMBRI MANUFACTURING CORPORATION STATEMENT OF COMPERHENSIVE INCOME FOR THE YEAR ENDED , DEC 31 2018
Sales Revenue		17100
Cost of Goods sold		(7100)
Gross Profit		10000
Operating Expenses :
Selling Expenses	1390
General & Admin exp.	890
Restructuring costs	2100	(4380)
Total Operating Expenses		5620
Other Income(Expenses) :
Loss on sale of investments	(310)
Interest Expenses	(210)
Interest Revenue	160
Total other Income (Expenses)		(360)
Income from continuing Op before tax		5260
Less: Income tax Expenses (40%)		(2104)
Income from continuing Operations		3156
Discontinued Operations :
Income from Op of Discontinued com.	960
Income tax expenses ( 40%)	(384)
Income from Discontinued Operation		786
Net Income		3732
Other Comprehensive Income(loss) :
Unrealized gains from invest( net of tax)	240
Loss from foreign currency trans( net of tax)	(198)	42
Comprehensive Income		3774

Income
Earnings per share :
Income from continuing operations (3156 / 1200)	2.63
Income from Discontinued Operations ( 576 / 1200)	0.48
Net Income	3.11

Workings Income from operations of discontinued components Division incurred Loss (620) Assets were sold @ gain 1580 Income from operations of discontinued components 960 Unrealized gain net of tax ( 1-40%)*400 = 240 Loss from foreign currency translation net of tax (1-40%)*330 = 198 The depreciation expenses error is prior period adjustment (related to retained earnings) and there lose its not reported in income statement Earnings per share ( Weighted avg shares ) Outstanding beginning ( 1000000*12/12) 1,000,000 July 1/2018 ( 400000*6/12) 2,00,000 Avg O/s common shares 12,00,000 O/s share( in million) 1200

(2) SCHEMBRI MANUFACTURING CORPORATION STATEMENT OF COMPERHENSIVE                                          INCOME FOR THE YEAR ENDED Dec 31 2018 ( $ in 000s)
Net Income		3732
Other Comprehensive Income (loss):
Unrealized gain from invest (net of tax)	240
Loss from foreign currency tran. (net of tax )	(198)
Total other comprehensive Income		42
Comprehensive Income		3774