Mindanao State University

College of Business Administration and Accountancy

DEPARTMENT OF ACCOUNTANCY
Marawi City

STATEMENT OF COMPREHENSIVE INCOME

Accounting 123

Name: _______________________________, CPA Section: _________ Score: __________

TRUE OR FALSE. Write A if the statement is correct and B if the statement is wrong. Erasures
are strictly not allowed.

_______1. Comprehensive income is an increase in economic benefit during the accounting

period in the form of inflow or increase in asset or decrease in liability that results in
increase in equity, other than contribution from equity participants.
_______2. Other comprehensive income comprises items of income and expense including
reclassification adjustments that are not recognized in profit or loss as required or
permitted by PFRSs and does not include dividends paid to shareholders.
_______3. An entity, whether presenting a single of statement of comprehensive income or a
separate income statement and statement of comprehensive income, must present
a statement of changes in equity.
_______4. Comprehensive income and net income are not synonymous.
_______5. Reclassification adjustments are amounts reclassified to other comprehensive
income in the current period but were recognized in profit or loss in the current or
previous period.
_______6. An entity presenting a natural income statement shall disclose additional
information on the nature of expenses including depreciation, amortization and
employee benefit cost.
_______7. PAS 1 does not require the use of cost of sales method even if this presentation
often provides more relevant information to users than the nature of expense
method.
_______8. Conceptually, net income is a measure of wealth.
_______9. The transaction approach to income measurement underlies financial accounting
and reporting.
_______10. The term comprehensive income must be reported on the face of the income
statement.
_______11. Under the transaction approach, the financial statement effects of business events
are classified as revenue, gains, expenses and losses which are used to measure
and define income.
_______12. A loss on disposal of a non-current asset is an example of an expense.
_______13. The physical capital transaction approach requires adoption of the current cost
measurement basis.
_______14. Under the physical capital concept, such as operating capability, capital is
regarded as the productive capacity of the entity whereas under the financial
capital concept, such as invested money, capital is synonymous with the net
assets or equity of the entity.
_______15. Profit is any amount over and above that required to maintain the capital at the
beginning of the period.
_______16. Under a strict transaction approach to income measurement, adjustment of
inventory to lower of cost or net realizable value when net realizable value is below
cost is not considered a transaction and should not be included in the
determination of net income.
_______17. A transaction that is material in amount, unusual in nature and infrequent in
occurrence shall be presented separately as a component of income from
continuing operations net of applicable income tax.
_______18. An entity has two options in presenting comprehensive income. The entity may
present a single income statement or a separate income statement and statement
of comprehensive income.

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_______19. The financial performance of an entity is primarily measured in terms of the level of
income earned by the entity through the effective and efficient utilization of its
resources.
_______20. The income statement covers a period unlike a statement of financial position
which is prepared as of a given date or particular moment in time.
_______21. Unrealized gain or loss on investments in equity instruments measured at fair value
though profit or loss is not an example of other comprehensive income.
_______22. Income includes both the revenue that arises from the ordinary course of
operations and the gains resulting from incidental transactions.
_______23. Extraordinary items are no longer allowed to be presented as part of the income
statement and statement of comprehensive income.
_______24. No cost of sales line item is presented when using the nature of expense method.
_______25. Comprehensive income excludes prior period errors and the effects of changes in
accounting policies.
_______26. The financial performance of an entity is determined using two approaches namely,
financial capital approach and physical capital approach.
_______27. The purpose of the statement of comprehensive income is to provide a more
comprehensive information on financial performance measured more broadly than
the income as traditionally computed.
_______28. The statement of retained earnings is no longer a required basic statement.
_______29. The statement of changes in equity is a formal statement that shows the
movements in the elements and components of stockholders’ equity.
_______30. Dividends paid shall be recognized in the statement of comprehensive income.
_______31. A loss on disposal of asset shall be recognized in the statement of changes in
equity.
_______32. Profit is the residual amount that remains after expenses have been deducted from
income.
_______33. Allocation of profit or loss and total comprehensive income attributable to non-
controlling interests and owners of the parent shall be disclosed on the face of the
income statement and statement of comprehensive income.
_______34. Comprehensive income less other comprehensive income equals the profit or loss
for a given period.
_______35. Under PAS 1, the holders of instruments classified as equity are simply known as
“owners.”

SHORT PROBLEMS. Compute for the amounts asked by each problem. Final answers should
be written on the space provided. Write your solutions in a separate sheet of paper. Erasures
are strictly not allowed.

PROBLEM 1: Brock Company reports operating expenses according to their function within the
entity. The adjusted trial balance on December 31, 2011, included the following expense and
loss accounts:
Accounting and audit fees P 100,000
Advertising 275,000
Freight out 125,000
Doubtful accounts expense 90,000
Freight in 300,000
Interest on bonds issued 130,000
Loss on sale of long-term investment 270,000
Officers’ salaries and bonuses 1,245,000
Rent for office space 190,000
Sales salaries and commissions 800,000
Legal fees 175,000
Interest on inventory loan 260,000
Insurance 450,000
Income tax expense
Depreciation of building (1/3 of which is occupied
by the sales department and the rest by the
entity’s officers and staff) 900,000
1. How much should be classified as general and administrative expenses by Brock?

Answer: ___________________________

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 2. How much should be classified as distribution costs by Brock?

Answer: ___________________________

PROBLEM 2: Selected information from the accounting records of Vigor Company for 2011 is
as follows:
Net accounts receivable, January 1 P 1,800,000
Net accounts receivable, December 31 2,000,000
Accounts receivable turnover 5 times
Inventory, January 1 2,200,000
Inventory, December 31 2,400,000
Inventory turnover 4 times
3. How much is Vigor Company’s purchases?

Answer: ___________________________

4. How much is Vigor Company’s gross profit?

Answer: ___________________________

PROBLEM 3: The following information was taken from Armenia Company’s accounting
records for the current year:
Decrease in raw materials inventory P 500,000
Increase in goods in process inventory 800,000
Decrease in finished goods inventory 1,000,000
Raw materials purchased 20,000,000
Indirect labor – factory 600,000
Freight in 400,000
Factory supervisor’s salary 100,000
Direct labor payroll 5,000,000
Freight out 200,000
Depreciation – factory building 1,000,000
Utilities (2/3 applicable to factory building and 1/3
to office building) 3,000,000
Depreciation – office building 800,000
Indirect materials – factory 750,000
Insurance on (2/3 applicable to factory building
and 1/3 to office building) 990,000
Advertising 150,000
Loss on inventory writedown 225,000
5. What is Armenia’s cost of goods manufactured?

Answer: ___________________________

6. What is Armenia’s cost of goods sold?

Answer: ___________________________

PROBLEM 4: The financial records of Ronalyn Company were destroyed by fire at the end of
the current year. However, certain statistical data related to the income statement are available.
Interest expense P 20,000
Cost of goods sold 2,700,000
Sales discount 200,000
The beginning inventory was P400,000 and decreased 20% during the year. Administrative
expenses are 20% of cost of goods sold but only 9% of net sales. Four-fifths of the operating
expenses relate to sale activities.
7. Ignoring income tax, what is the net income for the current year?

Answer: ___________________________

PROBLEM 5: Thorpe Company reported net income of P9,750,000 for the current year. The
auditor raised questions about the following amounts that had been excluded from net income:

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 Unrealized loss on foreign currency translation P 320,000
Gain on early extinguishment of bonds payable 200,000
Adjustment of profit of prior year for error on
depreciation (gross of tax of 30%) 150,000
Loss from fire 450,000
Equity in earnings of Cinn Company – 40% 1,000,000
Dividend received from Cinn Company 300,000
Revaluation surplus 400,000
8. What is the corrected amount of net income?

Answer: ___________________________

PROBLEM 6: Witt Company, an entity engaged in the manufacture of bicycles incurred the
following during the current year:
Loss from major strike by employees P 350,000
Gain from condemnation of asset 300,000
Loss from abandonment of equipment used in
business 250,000
9. In the income statement, what is the total amount of infrequent losses and gains that
must be excluded from income from continuing operations?

Answer: ___________________________

10. What amount should be presented as net extraordinary gains or losses?

Answer: ___________________________

PROBLEM 7: The following information is provided by Puerto Rico, Inc. for the current year:
Sales P 2,500,000
Cost of goods sold 1,200,000
Distribution costs 250,000
General and administrative expenses 450,000
Interest expense 150,000
Gain on early extinguishment of long-term debt 50,000
Correction of error, net of tax – debit 75,000
Investment income – equity method 88,000
Gain on expropriation 25,000
Income tax expense 50,000
Dividends declared 130,000
Foreign translation adjustment – credit 85,000
Unusual and infrequent gains 300,000
Casualty loss 150,000
Finance charges on factoring of receivables 110,000
Loss on sale of investments 65,000
11. What amount should be reported by Puerto Rico as income from continuing operations?

Answer: ___________________________

12. At what amount should finance costs be reported by Puerto Rico?

Answer: ___________________________

PROBLEM 8: The adjusted trial balance of Dahlia Company included the following accounts for
the current year:
Sales P 2,700,000
Interest revenue 1,100,000
Gain on sale of equipment 350,000
Revaluation surplus during the year 550,000
Share of profit of associate 250,000
Cost of goods sold 150,000
Finance costs 175,000
Distribution costs 188,000

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 Administrative expenses 125,000
Translation loss on foreign operation 150,000
Income tax expense 130,000
Impairment loss 185,000
Unrealized gain on financial assets at fair value
through other comprehensive income 300,000
13. What amount should be presented as other comprehensive income?

Answer: ___________________________

14. What is Dahlia’s total comprehensive income?

Answer: ___________________________

PROBLEM 9: Mara Company provided the following net of tax figures for the current year:
Pension liability adjustment recognized in other
comprehensive income – credit P 60,000
Unrealized gain on financial assets at fair value
through other comprehensive income 300,000
Reclassification adjustment for gain on sale of
securities included in net income 50,000
Share warrants outstanding 80,000
Net income 1,540,000
15. What is the comprehensive income of Mara Company for the current year?

Answer: ___________________________

“Nothing in this world has ever been accomplished

without passion, faith and hard work.”
Anonymous

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