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, $15,700; cost of goods sold, $6,400; selling expenses, $1,320; general and administrative expenses, $820; interest revenue, $80; interest expense, $200. Income taxes have not yet been recorded. The company’s income tax rate is 25% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2021 ($ in thousands). All transactions are material in amount. Investments were sold during the year at a loss of $240. Schembri also had an unrealized gain of $360 for the year on investments in debt securities that qualify as components of comprehensive income. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,400. 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 $580 in 2021 prior to the sale, and its assets were sold at a gain of $1,440. In 2021, the company’s accountant discovered that depreciation expense in 2020 for the office building was understated by $220. Negative foreign currency translation adjustment for the year totaled $260.

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

SCHEMBRI MANUFACTURING CORPORATION

Statement of comprehensive income

For the year ended December 31, 2021

($ in 000s)

Sales revenue		$15700
Cost of goods sold		$6400
Gross profit		$9300
Operating expenses:-
Selling expenses	$1320
General and administrative expenses	$820
Restructuring cost	$1400
Total operating expenses		$3540
Operating income		$5760
Other income (expenses):-
Loss on sale of investment	$(240)
Interest expenses	$(200)
Interest revenue	$80
Other income (expenses)		$(360)
Income from continue operation before income tax		$5400
Income tax expenses (25%)		$1350
Income from continuing operations		$4050
Discontinued operation :-
Income from operation of discontinued component (1440-580)	$860
Income tax expenses	$(215)
Income from discontinued operation		$645
Net income		$4695
Other comprehensive income (loss)
Unrealized gain from investment, net of tax [360*(1-25%)]	$270
Loss from foreign currency translation, net of tax [260*(1-25%)]	$(195)
Total other comprehensive income		$75
Comprehensive income		$4770
Earnings per share :-
Income from continuing operation	3.37
Income from discontinued operation	0.53
Net income	3.9

Weighted average share = 1000000+ (400000/2) = 1200000

Net income from continue operation = 4050/1200 = 3.37

Net income from discontinued operation = 645/1200 = 0.53

.

SCHEMBRI MANUFACTURING CORPORATION

Statement of comprehensive income

For the year ended December 31, 2021

($ in 000s)

Net income		4695
Other comprehensive income (loss)
Unrealized gain from investment, net of tax [360*(1-25%)]	270
Loss from foreign currency translation, net of tax [260*(1-25%)]	(195)
Total other comprehensive income		75
Comprehensive income		$4770