Duke Company’s records show the following account balances at December 31, 2018:Sales $15,000,000Cost of goods sold 9,000,000General and administrative expenses 1,000,000Selling expenses 500,000Interest expense 700,000Income tax expense has not yet been determined. The following events also occurred during 2018. All transactions are material in amount.1. $300,000 in restructuring costs were incurred in connection with plant closings.2. Inventory costing $400,000 was written off as obsolete. Material losses of this type are considered to beunusual.3. It was discovered that depreciation expense for 2017 was understated by $50,000 due to a mathematical error.4. The company experienced a negative foreign currency translation adjustment of $200,000 and had unrealizedgains on investments of $180,000.Required:Prepare a single, continuous multiple-step statement of comprehensive income for 2018. The company’s effective tax rate on all items affecting comprehensive income is 40%. Each component of other comprehensiveincome should be displayed net of tax. Ignore EPS disclosures.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Duke Company’s records show the following account balances at December 31, 2018:
Sales $15,000,000
Cost of goods sold 9,000,000
General and administrative expenses 1,000,000
Selling expenses 500,000
Interest expense 700,000
Income tax expense has not yet been determined. The following events also occurred during 2018. All transactions are material in amount.
1. $300,000 in restructuring costs were incurred in connection with plant closings.
2. Inventory costing $400,000 was written off as obsolete. Material losses of this type are considered to be
unusual.
3. It was discovered that
4. The company experienced a negative foreign currency translation adjustment of $200,000 and had unrealized
gains on investments of $180,000.
Required:
Prepare a single, continuous multiple-step statement of comprehensive income for 2018. The company’s effective tax rate on all items affecting comprehensive income is 40%. Each component of other comprehensive
income should be displayed net of tax. Ignore EPS disclosures.
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