Tony Co, a retail supermarket, is preparing financial statements for their December 31, 20X7 fiscal year end. Tony asks you, their accountant, to help compile the Statement of Financial Performance. They also are puzzled about the calculation of Retained Earnings and OCI. Tony's tax rate is 30%. Tony has calculated Operating Income as $280,000, but the remaining items have still to be categorized. Compile (in good form) the Statement of Financial Performance starting at Operating Income given the following information: (1) Tony holds another investment in shares which is classified as FV-OCI. This investment increased in value by $2,500 during 20X7. (2) Tony sold assets during the year. FV-OCI investments were sold for a current year gain of $6,500 (selling price was $48,000 and original cost in 20X1 was $32,500). Two pieces of PPE were sold during the year: a small warehouse was sold for $27,500 (note: the warehouse was revalued in 20X6 at $30,500. Previous OCI gains/losses on the warehouse were $7,500); and equipment was sold for $5,000 (cost method used with book value before sale of $1,500). FV-NI investments were sold for $5,000 less than their holding amount. The non-recycling method is appropriate for all gains/losses through OCI. (3) Tony sold their liquor store chain during the year at a (before tax) gain of $25,000. Income from the liquor stores during 20X7 was $98,000 (before tax). (4) Tony recorded dividend income of $5,000 and declared dividends of $17,500. (5) Tony consolidated its financial statements and has a revaluation loss on pension plan of $20,000. 

Required: 

(a) Prepare Tony's Statement of Financial Performance starting from Operating Income

 (b) Calculate Tony's post-closing Retained Earnings and AOCI at Dec 31, 20X7 (Beginning balances: RE $340,000; AOCI $30,000).

Answer rating: 100% (QA)

a Operating Income 280000 Investment Income FVOCI investments increased ... View the full answer