CHAPTER 4 HOMEWORK INTERMEDIATE ACCOUNTING
The statement of cash flows classifies all cash inflows and outflows into one of
three categories: Operating activities, Investing activities, Financing activities.
In addition, certain transactions that do not involve cash are reported in the
statement as noncash investing and financing activities.
a. Operating activities
b. Investing activities
c. Financing activities
d. Noncash investing and financing activities
Required:
For each of the following transactions, select the appropriate classification
category.
1.
Investing activitiesselected answer correct
Purchase of equipment for cash.
2.
Operating activitiesselected answer correct
Payment of employee salaries.
3.
Operating activitiesselected answer correct
Collection of cash from customers.
4.
Financing activitiesselected answer correct
Cash proceeds from a note payable.
5.
Investing activitiesselected answer correct
Purchase of common stock of another
corporation for cash.
6.
Financing activitiesselected answer correct
Issuance of common stock for cash.
7.
Investing activitiesselected answer correct
Sale of equipment for cash.
8.
Operating activitiesselected answer correct
Payment of interest on note payable.
9.
Noncash investing and financing activitiesselected
answer correct
Issuance of bonds payable in exchange for
land and building.
10.
Financing activitiesselected answer correct
Payment of cash dividends to shareholders.
11.
Financing activitiesselected answer correct
Payment of principal on note payable.
Problem 4-7 Income statement presentation; statement of
comprehensive income; unusual items [LO4-1, 4-3, 4-4, 4-5, 4-6]
The following income statement items appeared on the adjusted trial balance of
Schembri Manufacturing Corporation for the year ended December 31, 2018 ($
in 000s): sales revenue, $15,300; cost of goods sold, $6,200; selling expenses,
$1,300; general and administrative expenses, $800; interest revenue, $85;
interest expense, $180. Income taxes have not yet been recorded. The company’s
income tax rate is 40% on all items of income or loss. These revenue and expense
items appear in the company’s income statement every year. The company’s
controller, however, has asked for your help in determining the appropriate
treatment of the following nonrecurring transactions that also occurred during
2018 ($ in 000s). All transactions are material in amount.
1. Investments were sold during the year at a loss of $220. Schembri
also had unrealized gains of $320 for the year on investments.
2. One of the company’s factories was closed during the year.
Restructuring costs incurred were $1,200.
3. During the year, Schembri completed the sale of one of its operating
divisions that qualifies as a component of the entity according to
GAAP. The division had incurred a loss from operations of $560 in
2018 prior to the sale, and its assets were sold at a gain of $1,400.
4. In 2018, the company’s accountant discovered that depreciation
expense in 2017 for the office building was understated by $200.
5. Negative foreign currency translation adjustment for the year
totaled $240.
Required:
1. Prepare Schembri’s single, continuous multiple-step statement of
comprehensive income for 2018, including earnings per share disclosures. One
million shares of common stock were outstanding at the beginning of the year
and an additional 400,000 shares were issued on July 1, 2018.
2. Prepare a separate statement of comprehensive income for 2018.
Explanation
Discontinued operations:
Income from operations of discontinued component (including gain on disposal of $1,400) = $840
Earnings per share:
Weighted-average shares = 1,000,000 + (400,000 / 2) = 1,200,000
Note: The depreciation expense error is a prior period adjustment (to retained earnings) and is not
reported in the income statement.
Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for
2018, including earnings per share disclosures. One million shares of common stock were
outstanding at the beginning of the year and an additional 400,000 shares were issued on
July 1, 2018. (Amounts to be deducted should be indicated with a minus sign. Enter your
answers in thousands. Round EPS answers to 2 decimal places.)
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SCHEMBRI MANUFACTURING CORPORATION
Statement of Comprehensive Income
For the Year Ended December 31, 2018
($ in 000s)
Sales revenue
Cost of goods sold
Gross profit
Operating expenses
Selling expense
$(1,300)
General and administrative expense
(800)
Restructuring costs
(1,200)
Total operating expenses
Operating income
Other income (expense)
Loss on sales of investments
$(220)
Interest expense
(180)
Interest revenue
85
Other income (expense)
Income from continuing operations
before income taxes
Income tax expense
Income from continuing operations
Discontinued operations
Income from operations of
discontinued component
840
Income tax expense
(336)
Income from discontinued operations
Net income
Other comprehensive income (loss)
Unrealized gains from investments,
net of tax
192
Loss from foreign currency translation,
net of tax
(144)
Comprehensive income
$3,843 =SUM(C28,C31)
Earnings per share:
Income from continuing operations
Income from discontinued operations
Net income
$3,795
Other comprehensive income (loss)
Total other comprehensive income
Comprehensive income
$3,843