Question

Duke Company's records show the following account balances at December 31, 2016:

Answer 1

Answer:

a single, continuous multi-step statement of comprehensive income for 2016

Sales                                                          $15,000,000

Cost of Goods Sold                                  ($ 9,400,000)

Gross Profit                                                 $5,600,000

Less Expenses

General and Administrative expenses.    ($1,030,000)

Selling Expenses                                         ($500,000)

Interest expense                                          ($700,000)

Net Income before tax                               $3,370,000

Income tax expense at 40%                     ($ 1,348,000)

Net Income after tax                                  $ 2,022,000

Explanation:

First make the adjustments that affect the Income Statement as follows :

Item 2. Obsolete Inventory

Cost of Goods Sold = $9,000,000 + $400,000 = $ 9,400,000

Reason : Correction of Costs of Sales that has been understated.

Item 3. Depreciation

General and Administrative expenses = $1,000,000 + $50,000 = $1,050,000

Reason : Correction  of Depreciation Expenses that was understated.

Item 4. Gains and Loses

General and Administrative expenses =   $1,050,000

foreign currency translation loss          =    ($200,000)

unrealized gains on investments          =      $180,000

General and Administrative expenses  =  $1,030,000

Note : Item 1 is a Capital Expenditure.