The following income statement was prepared by Walters Corporation a seller of equipment for the year ended
Question:
The following income statement was prepared by Walters Corporation a seller of equipment for the year ended Dec-31, 2013
Walters Corporation
Comprehensive Income Statement
For the year ended Dec-31, 2013
Sales revenue (Note: 1)……………………………………………………………………………………... $310,000
Cost of goods sold…………………………………………………………………………………………………………..…(140,000)
Gross profit………………………………………………………………………………………………………………………. 170,000
Less: Operating Expenses.
Selling and administrative expenses…………………………………………50,000
Loss on sale of Investment……………………………………………………… 15,000 (65,000)
Other income and expense
Gain on sale of plant assets…………….………………………………....... 40,000
Depreciation expense……………………………………………….……..….. (15,000)
Rent Expense………………………………………………………….……..…….. (6,000)
Dividend revenue…………………………………………………………….…… 50,000
Gain on disposal of a business division (net of tax)…………………. 30,000
Loss due to earthquake (Note-2) ………………………………...………… (5,000) 94,000
Income from operations…………………………………………………………………………………..……………….. 199,000
Interest expense………………………………………………………………………………………………………………. (6,000)
Income before tax..……………………………………………………………………………………….………………….….193,000
Tax Expense………………………………………………………………………………………………………………………….(15,000)
Net Income ………………………………………………………………………………………………….………………….…..178,000
Discontinued operations
Loss on operation of discontinued division (Note-3)..………………………………………………………… (10,000)
Net Income before extraordinary Item…………………………………………………………………………….168,000
Extra ordinary item
Loss on Impairment of Equipment………………………………………….…2,000
Restructuring Cost…………………………………………………………………….4,000 (6,000)
Net Income after extraordinary item …………………………………………………………………………………. 162,000
Basic EPS ……………………………………………………………………….…………………………………………… $13.5/share
Diluted EPS……………………………………………………………………………………………………………..……….$ 15/share
Attributable to
Non-controlling interest…………………………………..……………………………………………………….………. 40,500
Shareholders of Walters………………………………………….…………………………………………….…….…. 121,500
Explanation of Notes
Note 1: Including in the Sales
- $ 50,000 is related to goods sent on consignment
- $ 15,000 is related to goods sold with a buy back arrangement with restriction on the use of this equipment by Walter.
- $ 20,000 in respect of layaway sales representing initial deposit made by customers.
- $ 60,000 to a customer whom title has been transferred but goods are not delivered on customers ‘request.
Note 2: The loss is unexpected as this place has never experienced earthquake in past 30 years
Note-3 The tax in respect of loss on operations of discontinued division is amounting $ 2,000
Required:
- Comment on the above Notes e whether things are treated properly or not;
- Highlight any weakness regarding the presentation or treatment of any item in the presented Comprehensive Income statement not covered in notes.
Fundamental financial accounting concepts
ISBN: 978-0078025365
8th edition
Authors: Thomas P. Edmonds, Frances M. Mcnair, Philip R. Olds, Edward