Question

Information for 2019 follows for Forest Glen Corporation:

Retained earnings, January 1, 2019 $ 1,980,000

Sales revenue 35,000,000

Cost of goods sold 29,000,000

Interest income 150,000

Selling and Administrative expenses 3,000,000

Loss resulting from calculation error on depreciation in 2018 (pre-tax) 600,000

Loss on impairment of goodwill (not tax deductible) 500,000

Gain on sale of fair value-net income investments (normal, recurring) 100,000

Loss-other (due to flood damage) 400,000

Loss from disposal of discontinued division (pre-tax) 350,000

Loss from operation of discontinued division (pre- tax) 200,000

Dividends declared on common shares 250,000

Forest Glen decided to discontinue its entire wholesale division (a major line of business) and to keep its manufacturing division. On September 15, it sold the wholesale division to Dynamic Corporation. During 2019, there were 800,000 common shares outstanding all year. Forest Glen’s tax rate is 20% on operating income and all gains and losses (use this rate where the tax provisions are not given). Forest Glen prepares financial statements in accordance with IFRS and accounts for its investments in accordance with IAS 39. Note: pre-tax means before tax.

Instructions:

a) Prepare a multi-step statement of comprehensive income showing expenses by function.

b) Prepare a Statement of Changes in Shareholders’ Equity

Answer 1

Forest Glen Corporation Income statement for the month ending 31st Jan.2019 Particulars Details $ Amount $ 35,000,000 29,000,000 6,000,000 3.000.000 3,000,000 150,000 100,000 Sales Revenue Less Cost of Goods Sold Gross Profit / Loss Selling and administrative expenses Income from Operations Other revenues and Gains Interest revenue Gain on the sale of investments Income from continuing Operations before tax Less income Tax Income from continuing Operations Discontinued Operations Loss on operations net of tax Loss on disposal net of tax Income before extraordinary item Loss on impairment of goodwill Extraordinary item - Loss from flood of damage Net Income 250,000 3,500,000 700,000 2,800,000 160,000 280,000 440,000 2,360,000 500,000 400.000 1,960,000

2,800,000 800,000 3.50 Earnings per share Income from continuing Operations No. of shares Income from continuing Operations Discontinued Operations Loss on operations net of tax Loss on disposal net of tax Income before extraordinary item Loss on impairment of goodwill Extraordinary item - Loss from flood of damage Net Income (0.20) (0.35) (0.55) 2.85 0.63 0.50 1.72 Forest Glen Corporation Statement of Changes in Equity for the month ending 31st Jan.2019 Details $ Amount $ 1980000 -480000 Particulars Retained earnings, January 1, 2019 Loss resulting from calculation error on depreciation in 2018 (pre-tax) Add Net Income Less Dividend declared Retained earnings, January 31, 2019 1,960,000 (250,000) 1,710,000 3,210,000