Question

SA Comp #2

Duke Company’s records show the following account balances at December 31, 2018:

Sales	$	17,400,000
Cost of goods sold		10,200,000
General and administrative expenses		1,120,000
Selling expenses		620,000
Interest expense		820,000

Income tax expense has not yet been determined. The following events also occurred during 2018. All transactions are material in amount.

1. $420,000 in restructuring costs were incurred in connection with plant closings.
2. Inventory costing $520,000 was written off as obsolete. Material losses of this type are considered to be unusual.
3. It was discovered that depreciation expense for 2017 was understated by $62,000 due to a mathematical error.
4. The company experienced a negative foreign currency translation adjustment of $320,000 and had unrealized gains on investments of $300,000.

Required:
Prepare a single, continuous multiple-step statement of comprehensive income for 2018. The company’s effective tax rate on all items affecting comprehensive income is 20%. Each component of other comprehensive income should be displayed net of tax. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Duke Company 17400000 10200000 7200000 Statement of Comprehensive Income For the Year Ended December 31, 2018 Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses Selling expenses 620000 Administrative expenses 1120000 Restructuring Cost 420000 Loss from write-down on Obsolete Inventory 520000 Total Operating Expenses Operating Income Other Income (expenses) Interest expense Income before taxes Income Tax Expense Net Income Other Comprehensive income (loss), net of tax Foreign currency transaction adjustment, net of tax -240000 Unrealized gains 225000 Total Other Comprehensive Income (loss) Total Comprehensive Income 2680000 4520000 820000 3700000 740000 2960000 - 15000 2945000 320000*0.75 = 240000 300000*0.75 = 225000