Question

Exercise 4-4 (Algo) Multiple-step continuous statement of comprehensive income (L04-1, 4-5, 4-6] The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2021, included the following accounts: Debits Credits 2,540,000 Account Title Sales revenue Cost of goods sold Selling and administrative expense Interest expense Gain on debt securities 1,510,000 439,000 51,000 91,000 The gain on debt securities is unrealized and classified as other comprehensive income. The trial balance does not include the accrual for income taxes. Lindor's income tax rate is 25%. There were 1,300,000 shares of common stock outstanding throughout 2021. Required: Prepare a single, continuous multiple-step statement of comprehensive income for 2021, including appropriate EPS disclosures. (Round EPS answer to 2 decimal places.)

Answer 1

A statement of comprehensive income considers the outcome of gains and losses from the fluctuations in the value of assets, debt securities, etc. in the income statement.

LINDOR CORPORATION Statement of comprehensive income For the Year Ended December 31, 2021 Sales Revenue $2,540,000 Cost of goods sold $1,510,000 Gross Profit $1,030,000 Operating expenses Selling and Administrative Expense $439,000 Operating income $591,000 Other income (expense) Interest Expense $51,000 Income before income taxes $540,000 Income Tax Expense @25% $135,000 Net Income $405,000 Other comprehensive income Gain on debt securities, net of tax $68,250 Comprehensive income $473,250 Earnings per share $0.31

Calculation of income tax:

Income tax expense = 25% of income before tax = $540,000 × 25% = $135,000

Calculations of Gain on debt securities, net of tax:

Gain on debt securities before tax = $91,000  
Tax on Gain = $91,000 × 25% = $22,750

Gain on debt securities net of tax = $91,000 - $22,750 = $68,250

Calculation of Earnings per share:

Earnings per share = Net income/ Number of common shares outstanding = $405,000 / 1,300,000 = $0.31 per share