Question

Problem 4-03

Information for 2020 follows for Whispering Winds Corp.:

Retained earnings, January 1, 2020		$2,020,000
Sales revenue		37,400,000
Cost of goods sold		29,202,000
Interest income		150,000
Selling and administrative expenses		4,590,000
Unrealized gain on FV-OCI equity investments (gains/losses not recycled)		355,000
Loss on impairment of goodwill		541,000
Income tax on continuing operations for 2020 (assume this is correct)		705,000
Assessment for additional income tax for 2018 (normal, recurring, and not caused by an error)		486,000
Gain on disposal of FV-NI investments		127,000
Loss from flood damage		360,000
Loss on disposal of discontinued division (net of tax of $63,500)		254,000
Loss from operation of discontinued division (net of tax of $38,750)		155,000
Dividends declared on common shares		243,000
Dividends declared on preferred shares		80,000

Whispering Winds 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 Dylane Corp. During 2020, there were 500,000 common shares outstanding all year. Whispering Winds’s tax rate is 20% on operating income and all gains and losses (use this rate where the tax provisions are not given). Whispering Winds prepares financial statements in accordance with IFRS.

Prepare a multiple-step statement of financial performance for the year ended December 31, 2020, showing expenses by function. Include calculation of EPS. (Round EPS answers to 2 decimal places, e.g. 52.75.)

Answer 1

Below is the statement of financial performance: -

Whispering Winds Corp.
Statement of Comprehensive Income
For the Year Ended 2020
Sales Revenue		37,400,000
Less:
Cost of Goods Sold		29,202,000
Gross Profit		8,198,000
Less:
Selling and Administrative Expenses		4,590,000
Income from Operations		3,608,000
Other Revenues and Gains
Interest Income	150,000
Gain on Sale of Fair Value-Net Income Investments (normal, recurring)	127,000	277,000
		3,885,000
Other Expenses and Losses
Loss on Impairment of Goodwill	541,000
Loss from Flood Damage	360,000	901,000
Income from Continuing Operations before Tax		2,984,000
Income Tax Expenses
Tax Assessment Related to 2018	486,000
Income Tax Expense for 2020	705,000	1,191,000
Income from Continuing Operations		1,793,000
Discontinued Operations
Loss from Operations, Net of Tax Recovery	155,000
Loss from Disposal, Net of Tax Recovery	254,000	409,000
Net Income		1,384,000
Other Comprehensive Income
Unrealized Gain on Fair Value – OCI Investments, Net of Income Tax		284,000	355000-20%*355000
Comprehensive Income		1,668,000
Earnings Per Share
Income from Continuing Operations		3.59	1793000/500000
Discontinued Operations		0.82	409000/500000
Net Income		2.77	1384000/500000