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, $17,100; cost of goods sold, $7,100; selling expenses, $1,390; general and administrative expenses, $890; interest revenue, $160; interest expense, $210. Income taxes have not yet been recorded. The company’s income tax rate is 25% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2021 ($ in thousands). All transactions are material in amount.

1. Investments were sold during the year at a loss of $310. 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 $2,100.
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 $620 in 2021 prior to the sale, and its assets were sold at a gain of $1,580.
4. In 2021, the company’s accountant discovered that depreciation expense in 2020 for the office building was understated by $290.
5. Negative foreign currency translation adjustment for the year totaled $380.

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.

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. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands. Round EPS answers to 2 decimal places.)

Prepare a separate statement of comprehensive income for 2021. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)

Answer 1

1.

Comprehensive income statement of Schembri Manufacturing Corporation for the year ended 31-12-2021

Particular	Amount($)	Particular	Amount($)
To cost of goods sold	7100	By sales revenue	17100
To Administrative expense	890	By interest revenue	160
To selling expense	1390	By unrealized gain	400
To interest expense	210	By net profit on sale of asset	960
To loss in foreign currency transaction	380
To loss on sale of investment	310
To depreciation	290

To profit before tax(balancing figure)

8050

18620

18620

Calculation of net profit:

Profit before tax $ 8050

Less:Tax@25% $ 2012.5

Profit after tax(Net profit) $ 6037.5

Calculation of EPS:

Profit after tax(Net profit) = $ 6037.5

Total no. of Shares = Opening shares + shares issued during the year

= 1,000,000 + 400,000

= 1,400,000 shares.

Earning per share (EPS) = Profit after tax/Total no. of shares

= 6037.5/1,400,000

= 0.0043125 per share.

2.

Comprehensive income statement of Schembri Manufacturing Corporation for the year ended 31-12-2021

Particular	Amount in thousands	Particular	Amount in thousands
To cost of goods sold	7.1	By sales revenue	17.1
To Administrative expense	0.89	By interest revenue	0.16
To selling expense	1.39	By unrealized gain	0.4
To interest expense	0.21	By net profit on sale of asset	0.96
To loss in foreign currency transaction	0.38
To loss on sale of investment	0.31
To depreciation	0.29

To profit before tax(balancing figure)

8.05

18.62

18.62

Calculation of net profit:

Profit before tax $ 8.05

Less:Tax@25% - $ 2.0125

Profit after tax(Net profit)    $ 6.0375

Calculation of EPS:

Profit after tax = $ 6.0375

Total no. of Shares = Opening shares + shares issued during the year

= 1,000,000 + 400,000

= 1,400,000 shares.

Earning per share (EPS) = Profit after tax/Total no. of shares

= 6.0375/1,400,000

= 0.004 per share.