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Chapter 4: 15E (page 186)

Roxanne Carter Corporation reported the following for 2017: net sales \(1,200,000, cost of goods sold \)750,000, selling and administrative expenses \(320,000, and an unrealized holding gain on available-for-sale securities \)18,000.

Instructions

Prepare a statement of comprehensive income, using (a) the one statement format and (b) the two statement format. (Ignore income taxes and earnings per share.)

Short Answer

Expert verified

The comprehensive income balance shows a balance of $148,000.

Step by step solution

01

Meaning of Comprehensive Income

Comprehensive income includes all the unrealizedand net income. It provides an overview of the company's income that is not fully reported on the income statement.

02

Preparing a statement of comprehensive income using one statement format

Roxanne Carter Corporation
Statement of Comprehensive Income
For the Year Ended 2017

Sales

$1,200,000

Cost of goods sold

750,000

Gross Profits

450,000

Selling and Distribution expenses

320,000

Net Income

130,000

Other Comprehensive Income

Unrealized holding Gains

18,000

Comprehensive Income

$148,000

03

Preparing the Income Statement using two statement format

Roxanne Carter Corporation
Income Statement
For the Year Ended 2017

Sales

$1,200,000

Cost of goods sold

750,000

Gross Profit

450,000

Selling and Distribution Expenses

320,000

Net Income

$130,000

Roxanne Carter Corporation
Statement of Comprehensive Income
For the Year Ended 2017


Net Income

$130,000

Unrealized holding Gain

18,000

Comprehensive Income

$148,000

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Most popular questions from this chapter

During 2017, Liselotte Company reported income of \(1,500,000 before income taxes and realized a gain of \)450,000 on the disposal of assets related to a discontinued operation. The criteria for classification as a discontinued operation is appropriate for this sale. The income is subject to income taxation at the rate of 34%. The gain on the sale of the plant is taxed at 30%. Indicate an appropriate presentation of these items in the income statement.

Question: Presented below is a combined single-step income and retained earnings statement for Nerwin Company for 2017.

(000 omitted)

Net sales revenue \(640,000

Costs and expenses

Cost of goods sold \)500,000

Selling, general, and administrative expenses 66,000

Other, net 17,000

583,000

Income before income tax 57,000

Income tax 19,400

Net income 37,600

Retained earnings at beginning of period, as previously reported 141,000

Adjustment required for correction of error (7,000)

Retained earnings at beginning of period, as restated 134,000

Dividends on common stock (12,200)

Retained earnings at end of period \(159,400

Additional facts are as follows.

1. “Selling, general, and administrative expenses” for 2017 included a charge of \)8,500,000 that was usual but infrequently occurring.

2. “Other, net” for 2017 included a loss on sale of equipment of $6,000,000.

3. “Adjustment required for correction of an error” was a result of a change in estimate (useful life of certain assets reduced to 8 years and a catch-up adjustment made).

4. Nerwin Company disclosed earnings per common share for net income in the notes to the financial statements.

Instructions

Determine from these additional facts whether the presentation of the facts in the Nerwin Company income and retained earnings statement is appropriate. If the presentation is not appropriate, describe the appropriate presentation and discuss its theoretical rationale. (Do not prepare a revised statement.)

Bradshaw Company experienced a loss that was deemed to be both unusual in nature and infrequent in occurrence. How should Bradshaw report this item in accordance with IFRS?

Linus Paper Company decided to close two small pulp mills in Conway, New Hampshire, and Corvallis, Oregon. These two closings do not represent a major shift in strategy for the company. Would these closings be reported in a separate section entitled “Discontinued operations after income from continuing operations”? Discuss.

In 2017, Hollis Corporation reported net income of \(1,000,000. It declared and paid preferred stock dividends of \)250,000. During 2017, Hollis had a weighted average of 190,000 common shares outstanding. Compute Hollis’s 2017 earnings per share.

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