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FINANCIAL ACCOUNTING AND REPORTING
STATEMENT OF COMPREHENSIVE INCOME
Learning Objectives:
Problem 1.
Problem 2.
Problem 3.
Problem 4.
Problem 5.
Problem 6.
Problem 7.
Problem 8.
1.
Determining correct items to be included in profit or loss.
Income from continuing operations distinguished from discontinued operations.
Classifying expenses according to function.
Determining profit using the nature of expense format.
Cost of goods sold computed using increases and decreases in inventory accounts.
Work back problem by determining cost of goods sold using the gross profit method.
Determining profit and loss and comprehensive income.
Comprehensive problem on the two major classifications of other comprehensive
income.
Francis Company’s shareholders’ equity on January 1, 2019 was at P40,000,000. Francis Company did not issue any shares and did not
acquire any treasury shares during the year. The company reported a net income of P10,000,000 for the year ended December 31, 2019.
The auditor raised questions about the following amounts that had been included in the net income:
Loss from expropriation of property, net
Unrealized gain on the increase in value of FA at FVOCI
Adjustment of profit of prior year, net- debit
Accumulated forex translation loss
Revaluation surplus realized
Loss on write-off of inventory due to a government prohibition, net
1,500,000
500,000
4,500,000
2,000,000
1,000,000
3,500,000
The loss from expropriation was unusual in occurrence in Francis’s line of business. Francis Company’s 2019 income statement should report
net income at
a. 15,000,000
c. 15,500,000
b. 13,000,000
d. 16,000,000
2.
Hanson Company had the following gains during 2019 which was considered to be unusual and infrequent in Hanson’s line of business:
Gain on the extinguishments of long-term bonds payable
Foreign currency transaction gain due to major devaluation
Gain from the expropriation of asset
Loss from the disposal of assets of discontinued operation
500,000
600,000
800,000
1,000,000
What total amount of gains should Hanson include as component of income from continuing operations?
a. 1,400,000
c. 2,900,000
b. 1,900,000
d. 2,100,000
3.
Stallion Corporation separates operating expenses in two categories: selling, and general and administrative expenses. The adjusted trial
balance at December 31, 2019, included the following expenses and loss accounts:
Interest
Accounting and audit Fees
Advertising
Freight-out
Product development
Loss on sale of long-term investment
Officers' salaries
Depreciation on delivery equipment
Rent for office space
Sales salaries and commissions
1,400,000
500,000
800,000
1,600,000
350,000
100,000
900,000
400,000
1,200,000
750,000
One-half of the rented premises is occupied by the sales department. The entity’s total selling expenses for 2019 are
a. 4,750,000
c. 5,100,000
b. 3,950,000
d. 4,150,000
4.
The general ledger trial balance of Michael Company includes the following accounts on December 31, 2019:
Sales revenue
Interest income
Share of profit of associate
Other income
Decrease in inventory of finished goods
Raw materials and consumables used
Employee benefit expense
Translation loss of foreign operations
Depreciation
Impairment loss on property
Finance costs
Other expenses
Income tax expense
What is the profit for the year ended December 31, 2019?
a. 2,100,000
b. 1,800,000
9,750,000
200,000
150,000
50,000
250,000
3,500,000
1,500,000
300,000
450,000
800,000
350,000
450,000
750,000
c. 2,600,000
d. 6,000,000
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#2 Exercises
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5.
The following information was taken from Ozz Company’s accounting records for the year ended December 31, 2019:
Sales
Decrease in goods in process inventory
Decrease in raw materials inventory
Increase in finished goods inventory
Raw materials purchased
Direct labor payroll
Factory overhead
Freight in
Freight out
General and administrative expenses
10,000,000
200,000
350,000
500,000
2,100,000
1,000,000
800,000
300,000
900,000
1,600,000
How much is Ozz Company’s income before tax?
a. 4,150,000
b. 4,000,000
c. 3,250,000
d. 3,750,000
6.
The following information with regard to Brisbane Company’s inventory for 2019 is available:
Raw materials
Work in process
Finished goods
January 1
2,000,000
5,100,000
6,000,000
December 31
2,500,000
4,300,000
4,000,000
The gross profit rate historically is 30% of sales. The sales for the year amounted to P25,000,000. Direct labor costs for the year were
P6,000,000, and manufacturing overhead has been applied at 60% of direct labor. What was Brisbane’s raw material purchases in 2019?
a. 5,600,000
c. 7,100,000
b. 5,100,000
d. 7,600,000
7.
The income statement accounts of Gringo Company for the year 2019 included the following:
Net sales
Cost of goods sold
Distribution cost
Administrative expenses
Interest expense
Other expense
Interest income
Gain from expropriation
Investment income
Income tax
Income from discontinued operations
Unrealized gain FA at FVTOCI
Foreign currency translation adjustment loss
Revaluation surplus
Dividends declared
Investments by shareholders
Correction of an error-debit
9,500,000
4,000,000
600,000
1,200,000
700,000
400,000
200,000
100,000
200,000
800,000
600,000
1,100,000
200,000
2,500,000
1,000,000
400,000
3,000,000
1.
The 2019 statement of comprehensive income should report income before income taxes at what amount?
a. 3,000,000
b. 3,100,000
c. 2,300,000
d. 3,500,000
2.
The 2019 statement of comprehensive income should report income from continuing operations at what amount?
a. 3,200,000
b. 3,100,000
c. 2,300,000
d. 2,900,000
3.
The 2019 statement of comprehensive income should report net income at what amount?
a. 3,400,000
b. 3,100,000
c. 2,300,000
d. 2,900,000
4.
The 2019 statement of comprehensive income should report comprehensive income at what amount?
a. 5,700,000
b. 6,300,000
c. 5,900,000
d. 6,500,000
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#2 Exercises
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8.
Mark Company provided the following information for the current year:
Income from continuing operations
Income from discontinued operation
Unrealized gain on financial asset at FVTPL
Unrealized gain on equity financial assets at FVTOCI
Unrealized loss on bonds and other debt financial assets at FVTOCI
Unrealized gain on futures contract designated as a cash flow hedge
Actuarial loss during the year due to increase in PBO
Foreign translation adjustment – credit
Revaluation surplus during the year
Loss on credit risk of financial liability designated at FVPL
5,000,000
1,300,000
2,500,000
1,500,000
650,000
500,000
400,000
1,800,000
2,000,000
300,000
Mark’s tax rate is 30%. Other comprehensive items listed above are all net of tax amounts.
1. What is the net income reported for the current year?
a. 5,000,000
b. 6,300,000
c. 3,500,000
d. 4,410,000
2. What is the amount of OCI that is recycled to profit or loss?
a. 3,150,000
b. 1,650,000
c. 4,450,000
d. 1,500,000
3. What is the amount of OCI that is recycled to retained earnings?
a. 2,000,000
b. 2,800,000
c. 4,300,000
d. 4,450,000
4. What is the comprehensive income for the year?
a. 9,100,000
b. 10,750,000
c. 10,250,000
d. 12,550,000
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#2 Exercises