Question

The following income statement items appeared on the adjusted trial balance of Foxworthy Corporation for the year ended December 31, 2016 ($ in 000s): sales revenue, $23,300; cost of goods sold, $15,000; selling expenses, $2,400; general and administrative expenses, $1,300; dividend revenue from investments, $300; interest expense, $400. Income taxes have not yet been accrued. The company’s income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2016 ($ in 000s). All transactions are material in amount.

1.	Investments were sold during the year at a loss of $400. Foxworthy also had unrealized losses of $300 for the year on investments.
2.	One of the company’s factories was closed during the year. Restructuring costs incurred were $3,000.
3.	During the year, Foxworthy completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP regarding discontinued operations. The division had incurred operating income of $900 in 2016 prior to the sale, and its assets were sold at a loss of $1,600.
4.	Foreign currency translation gains for the year totaled $500.

Required:

Prepare Foxworthy’s single, continuous statement of comprehensive income for 2016, including earnings per share disclosures. Use a multiple-step income statement format. Two million shares of common stock were outstanding throughout the year. (Enter your answers in thousands of dollars, except earnings per share. Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)

Answer 1

SOLUTION

Foxworthy Manufacturing Corporation

Combined Statement of Income & Comprehensive Income

For the Year Ended December 31, 2016

Particulars	Amount ($)	Amount ($)
Sales Revenue		23,300
Cost of Goods Sold		15,000
Gross Profit		8,300
Operating Expenses:
Selling	2,400
Genaral & Administrative	1,300
Restructuring Costs	3,000
Total Operating Expenses		6,700
Operating Income		1,600
Other Income (Expense):
Loss on Sale of Investments	(400)
Interest Expense	(400)
Dividend Revenue	300
Other Income (Expense)		(500)
Income from Continuing Operations before Income Taxes & Extraordinary Items		1,100
Income Tax Expense 40%		(440)
Income from Continuing Operations before Extraordinary Items		660
Discontinued Operations:
Income from operations of Discontinued Component (including loss on disposal of $1,600)	(700)
Income Tax Benefit 40%	280
Loss from Discontinued Operations		(420)
Net Income		240
Other Comprehensive Income:
Unrealized Loss from Investments (Net of $120 Tax)	(180)
Gain from foreign currency Translation (Net of $200 Tax)	300	120
Comprehensive Income		360
Basic Earnings per Share:
Income from Continuing Operations before Extraordinary Item	0.33
Discontinued operations	(0.21)
Net income		0.12