Question:
The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing
Corporation for the year ended December 31, 2013 ($ in 000s): sales revenue, $15,300; cost of goods
sold,
$6,200; selling expenses, $1,300; general and administrative expenses, $800; interest revenue, $85;
interest expense, $180. Income taxes have not yet been accrued. The company’s income tax rate is 40%
on all items of income or loss. These revenue and expense items appear in the company’s income
statement every year. The company’s controller, however, has asked for your help in determining the
appropriate treatment of the following nonrecurring transactions that also occurred during 2013 ($ in
000s). All transactions are material in amount.
1. Investments were sold during the year at a loss of $220. Schembri also had unrealized gains of $320 for
the year on investments.
2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,200.
3. An earthquake destroyed a warehouse causing $2,000 in damages. The event is considered to be
unusual and infrequent.
4. 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 $560 in
2013 prior to the sale, and its assets were sold at a gain of $1,400.
5. In 2013, the company’s accountant discovered that depreciation expense in 2012 for the office building
was understated by $200.
6. Foreign currency translation losses for the year totaled $240.
Required:
1. Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2013,
including basic earnings per share disclosures. One million shares of common stock were outstanding at
the beginning of the year and an additional 400,000 shares were issued on July 1, 2013.
2. Prepare a separate statement of comprehensive income for 2013.
, Answer:
SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2013
($ in 000s)
Sales revenue ......................................................................... $15,300
Cost of goods sold .................................................................. 6,200
Gross profit ............................................................................ 9,100
Operating expenses:
Selling ................................................................................. $1,300
General and administrative ................................................. 800
Restructuring costs .............................................................. 1,200
Total operating expenses ................................................ 3,300
Operating income ................................................................... 5,800
Other income (expense):
Loss on sales of investments ....................................................................
$(220)
Interest expense .......................................................................................(180)
Interest revenue ........................................................................................ 85
Other income (expense) ........................................................................ (315)
The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing
Corporation for the year ended December 31, 2013 ($ in 000s): sales revenue, $15,300; cost of goods
sold,
$6,200; selling expenses, $1,300; general and administrative expenses, $800; interest revenue, $85;
interest expense, $180. Income taxes have not yet been accrued. The company’s income tax rate is 40%
on all items of income or loss. These revenue and expense items appear in the company’s income
statement every year. The company’s controller, however, has asked for your help in determining the
appropriate treatment of the following nonrecurring transactions that also occurred during 2013 ($ in
000s). All transactions are material in amount.
1. Investments were sold during the year at a loss of $220. Schembri also had unrealized gains of $320 for
the year on investments.
2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,200.
3. An earthquake destroyed a warehouse causing $2,000 in damages. The event is considered to be
unusual and infrequent.
4. 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 $560 in
2013 prior to the sale, and its assets were sold at a gain of $1,400.
5. In 2013, the company’s accountant discovered that depreciation expense in 2012 for the office building
was understated by $200.
6. Foreign currency translation losses for the year totaled $240.
Required:
1. Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2013,
including basic earnings per share disclosures. One million shares of common stock were outstanding at
the beginning of the year and an additional 400,000 shares were issued on July 1, 2013.
2. Prepare a separate statement of comprehensive income for 2013.
, Answer:
SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2013
($ in 000s)
Sales revenue ......................................................................... $15,300
Cost of goods sold .................................................................. 6,200
Gross profit ............................................................................ 9,100
Operating expenses:
Selling ................................................................................. $1,300
General and administrative ................................................. 800
Restructuring costs .............................................................. 1,200
Total operating expenses ................................................ 3,300
Operating income ................................................................... 5,800
Other income (expense):
Loss on sales of investments ....................................................................
$(220)
Interest expense .......................................................................................(180)
Interest revenue ........................................................................................ 85
Other income (expense) ........................................................................ (315)
