Q.1

The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2018 ($ in 000s): sales revenue, $15,700; cost of goods sold, $6,400; selling expenses, $1,320; general and administrative expenses, $820; interest revenue, $80; interest expense, $200. Income taxes have not yet been recorded. The companys income tax rate is 20% on all items of income or loss. These revenue and expense items appear in the companys income statement every year. The companys controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2018 ($ in 000s). All transactions are material in amount.

1) Investments were sold during the year at a loss of $240. Schembri also had unrealized gains of $340 for the year on investments.

2) One of the companys factories was closed during the year. Restructuring costs incurred were $1,400.

3) During the year, Schembri completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP. The division had incurred a loss from operations of $570 in 2018 prior to the sale, and its assets were sold at a gain of $1,440.

4) In 2018, the companys accountant discovered that depreciation expense in 2017 for the office building was understated by $220.

5) Negative foreign currency translation adjustment for the year totaled $260.

Required: 1. Prepare Schembris single, continuous multiple-step statement of comprehensive income for 2018, including earnings per share disclosures. One million shares of common stock were outstanding at the beginning of the year and an additional 400,000 shares were issued on July 1, 2018. 2. Prepare a separate statement of comprehensive income for 2018.

Q.2

Presented below are condensed financial statements adapted from those of two actual companies competing as the primary players in a specialty area of the food manufacturing and distribution industry. ($ in millions, except per share amounts.)

Balance Sheets
	Metropolitan				Republic
Assets
Cash	$	282.3			$	43.1
Accounts receivable (net)		513.7				416.0
Short-term investments						8.3
Inventories		562.4				719.2
Prepaid expenses and other current assets		216.6				576.7
Current assets	$	1,575.0			$	1,763.3
Property, plant, and equipment (net)		2,702.2				2,656.5
Intangibles and other assets		297.3				597.9
Total assets	$	4,574.5			$	5,017.7
Liabilities and Shareholders Equity
Accounts payable	$	572.9			$	781.2
Short-term notes		312.1				644.4
Accruals and other current liabilities		685.2				620.5
Current liabilities	$	1,570.2			$	2,046.1
Long-term debt		648.6				648.3
Deferred tax liability		474.6				703.7
Other long-term liabilities		215.0				193.1
Total liabilities	$	2,908.4			$	3,591.2
Common stock (par and additional paid-in capital)		229.9				440.0
Retained earnings		2,567.9				1,695.9
Less: Treasury stock		(1,131.7	)			(709.4	)
Total liabilities and shareholders equity	$	4,574.5			$	5,017.7
Income Statements
Net sales	$	5,794.0			$	7,856.2
Cost of goods sold		(2,818.0	)			(4,385.7	)
Gross profit	$	2,976.0			$	3,470.5
Operating expenses		(1,649.7	)			(2,933.2	)
Interest expense		(83.8	)			(43.6	)
Income before taxes	$	1,242.5			$	493.7
Tax expense		(295.7	)			(68.1	)
Net income	$	946.8			$	425.6
Net income per share	$	1.6			$	7.7

Evaluate and compare the two companies by responding to the following questions. Note: Because comparative statements are not provided you should use year-end balances in place of average balances as appropriate. Required: 1. For both companies, compute the ratios below. 2. Evaluate and compare the two companies.