Question

Duke Company’s records show the following account balances at December 31, 2021:

Sales revenue ................................................$15,000,000
Cost of goods sold ............................................9,000,000
General and administrative expense .............1,000,000
Selling expense ....................................................500,000
Interest expense ..................................................700,000

Income tax expense has not yet been determined. The following events also occurred during 2021. All transactions are material in amount.
1. $300,000 in restructuring costs were incurred in connection with plant closings.
2. Inventory costing $400,000 was written off as obsolete. Material losses of this type are considered to be unusual.
3. It was discovered that depreciation expense for 2020 was understated by $50,000 due to a mathematical error.
4. The company experienced a negative foreign currency translation adjustment of $200,000 and had an unrealized gain on debt securities of $180,000.

 

Required:
Prepare a single, continuous multiple-step statement of comprehensive income for 2021. The company’s effective tax rate on all items affecting comprehensive income is 25%. Each component of other comprehensive income should be displayed net of tax. Ignore EPS disclosures. Use a multiple-step format similar to the one in the Concept Review Exercise at the end of Part A of this chapter (excluding discontinued operations shown there).

 

Answer 1

DUKE COMPANY
Statement of Comprehensive Income
For the Year Ended December 31, 2021
Sales revenue ..................................................................			$15,000,000
Cost of goods sold ..........................................................			9,000,000
Gross profit .....................................................................			6,000,000
Operating expenses:
General and administrative expense ............................	$1,000,000
Selling expense ...........................................................	500,000
Restructuring costs ......................................................	300,000
Loss on inventory write-down .....................................	400,000
Total operating expenses ...........................................			2,200,000
Operating income ............................................................			3,800,000
Other income (expense):
Interest expense ...........................................................			(700,000)
Income before income taxes............................................			3,100,000
Income tax expense ........................................................			775,000
Net income .....................................................................			2,325,000
Other comprehensive income, net of tax:
Foreign currency translation adjustment………………	(150,000)
Gain on debt securities .................................................	135,000
Total other comprehensive income (loss) ..................			(15,000)
Comprehensive income ...................................................			$ 2,310,000

Comprehensive income ...................................................

$ 2,310,000