Q4-4IFRS - Intermediate Accounting (Kieso)

Question

Presented below is information related to Viel Company on December 31, 2017, the end of its first year of operations. 

Sales revenue                                                                                $310,000 

Cost of goods sold                                                                           140,000 

Selling and administrative expenses                                              50,000 

Gain on sale of plant assets                                                             30,000 

Unrealized gain on non-trading equity securities                          10,000 

Interest expense                                                                                  6,000 

Loss on discontinued operations                                                     12,000 

Allocation to non-controlling interest                                             40,000 

Dividends declared and paid                                                             5,000 

Instructions 

Compute the following: (a) income from operations, (b) net income, (c) net income attributable to Viel Company controlling shareholders, (d) comprehensive income, and (e) retained earnings balance on December 31, 2017. (Ignore income taxes.)

Step-by-Step Solution

Answer

Income from operations	$120,000
Net income	$132,000
Attributable net income	$127,000
Comprehensive income	$142,000
Retained earnings at December 31, 2017	$127,000

Meaning of Financial Information

In accounting, financial information refers to the economic data of a business entity. A business records its financial information daily in the books of accounts, and the same is summarized annually to draft the financial reports. 

Computation of income from operations

Particulars	Amounts ($)
Sales revenue	310,000
Less: Cost of goods sold	(140,000)
Gross profit	170,000
Less: Selling and administration expenses	(50,000)
Income from operations	120,000

Computation of net income

Particulars	Amounts ($)
Income from operations	120,000
Other expenses and income
Add: Gain on sale of plant assets	30,000
Total income	150,000
Less: Interest expense	(6,000)
Income from continued operations	144,000
Less: Loss on discontinued operations	(12,000)
Net income	132,000

Computation of net income attributable to controlling shareholders

Particulars	Amounts ($)
Net income	132,000
Less: Dividend declared and paid	(5,000)
Attributable net income	127,000

Computation of comprehensive income

Particulars	Amounts ($)
Net income	132,000
Add: Unrealized gain on non-trading equity securities	10,000
Comprehensive income	142,000

Computation of retained earnings balance

Particulars	Amounts ($)
Net income	132,000
Less: Dividends declared and paid	(5,000)
Retained earnings on December 31, 2017	127,000