Question

Presented below is information that relates to Halifax Limited for 2020:

      

       Accounts Payable ........................................................................................................ 49,000

       Accounts Receivable .................................................................................................... 78,000

       Bond Payable....................................................................................................... ..... 600,000

       Cash dividends declared on common shares.................................................................... 34,000  

       Collections of credit sales....................................................................................... $1,100,000

       Cost of goods sold.................................................................................................... 1,100,000

       Equipment ................................................................................................................... 85,000

       Gain from transactions in foreign currencies (pre-tax)................................................... 220,000

      

       Inventory.................................................................................................................... 120,000  

       Loss on sale of equipment .......................................................................................... 350,000  

       Loss from early debt repayment .................................................................................. 340,000

       Loss resulting from calculation error on depreciation charge in 2019.............................. 460,000

       Other expenses........................................................................................................... 120,000

       Other revenues............................................................................................................ 180,000  

       Proceeds from issue of Halifax common shares............................................................... 60,000

       Retained earnings, January 1, 2020.............................................................................. 800,000

       Sales........................................................................................................................ 1,900,000

       Selling and administrative expenses............................................................................. 290,000

       Unrealized Gain FV-NI ........................................................................................           20,000

      

Additional information to be included:

       On September 1, 2020, Halifax sold one of its segments (product line) to Best Industries for a gain (pre-tax) of $550,000. During the period January 1 to August 31, the discontinued segment incurred an operating loss (pre-tax) of $480,000. This loss is not included in any of the numbers shown above.

Instructions

In good form, prepare a multiple-step income statement for 2020. Assume a 20% income tax rate and that 20,000 common shares were outstanding during the year. Include Earnings Per Share.

Answer 1

Multi-step income statement for the period ended 2020
Income / Expenses	Amount
Income
Sales	1,900,000
Gain from transaction in foreign currencies	220,000
Gain FV-NI	20,000
Other revenues	180,000
Total income	2,320,000
Expenses
Cost of goods sold	1,100,000
Loss on sale equipment	350,000
Loss from early debt repayment	340,000
Loss from error in depreciation	460,000
Other expenses	120,000
Selling and administrative expenses	290,000
Total expenses	2,660,000
Loss from continuing operations	(340,000)
Losses from discontinuing operations	(480,000)
Extraordinary gain from sale of division	550,000
Total loss for the year before tax	(270,000)
Deferred tax benefit	54,000
Total loss for the year	(216,000)
Earnings per share-
Shares outstanding	20,000
EPS	(10.80)

Alternative format-

Multi-step income statement for the period ended 2020
Income / Expenses	Amount
Sales	1,900,000
Cost of goods sold	1,100,000
Gross profit	800,000
Operating expenses
Other expenses	120,000
Selling and administrative expenses	290,000
Total operating expenses	410,000
Operating income	390,000
Non operating income/ (expenses)
Loss on sale equipment	(350,000)
Loss from early debt repayment	(340,000)
Loss from error in depreciation	(460,000)
Gain from transaction in foreign currencies	220,000
Gain FV-NI	20,000
Other revenues	180,000
Income from continuing operations	(340,000)
Losses from discontinuing operations	(480,000)
Losses before extraordinary items	(820,000)
Extraordinary gain from sale of division	550,000
Total loss for the year before tax	(270,000)
Deferred tax benefit	54,000
Total loss for the year	(216,000)
Earnings per share-
Shares outstanding	20,000
EPS	(10.80)