Duke Company's records show the following account balances at December 31, 2016:
Sales...................... $15,000,000
Cost of Goods Sold...$9,000,000
General and Administrative expenses... $1,000,000
Selling Expenses........ $500,000
Interest expense........... $700,000
Income tax expense has not yet been determined.
The following events also occurred during 2016. 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 2015 was understated by $50,000 due to mathematical error.
4. The company experienced a foreign currency translation adjustment loss of $200,000 and had unrealized gains on investments of $180,000.
Required: Prepare a single, continuous multistep statement of comprehensive income for 2016. The company's effective tax rate on all items affecting comprehensive income is 40%. Each component of other comprehensive income should be displayed net of tax. Ignore EPS disclosures.

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Zviko Zviko · Answer 1 · 2020-06-24T04:02:40+02:00

Answer:

a single, continuous multi-step statement of comprehensive income for 2016

Sales $15,000,000

Cost of Goods Sold ($ 9,400,000)

Gross Profit $5,600,000

Less Expenses

General and Administrative expenses. ($1,030,000)

Selling Expenses ($500,000)

Interest expense ($700,000)

Net Income before tax $3,370,000

Income tax expense at 40% ($ 1,348,000)

Net Income after tax $ 2,022,000

Explanation:

First make the adjustments that affect the Income Statement as follows :

Item 2. Obsolete Inventory

Cost of Goods Sold = $9,000,000 + $400,000 = $ 9,400,000

Reason : Correction of Costs of Sales that has been understated.

Item 3. Depreciation

General and Administrative expenses = $1,000,000 + $50,000 = $1,050,000

Reason : Correction of Depreciation Expenses that was understated.

Item 4. Gains and Loses

General and Administrative expenses = $1,050,000

foreign currency translation loss = ($200,000)

unrealized gains on investments = $180,000

General and Administrative expenses = $1,030,000

Note : Item 1 is a Capital Expenditure.