Reference no: EM132472797

Point 1: Joe Schreiner, controller for On Time Clock Company Inc., recently prepared the company's income statement and statement of changes in equity for 2020. Schreiner believes that the statements are a fair presentation of the company's financial progress during the current period, but he also admits that he has not examined any recent professional pronouncements on accounting.

On Time Clock Company Inc.

Income Statement

For the Year Ended December 31, 2020

Sales revenues                                                                                   $358,675

Cost of goods sold                                                                                   198,112

Gross profit                                                                                             160,563

Selling expenses                                                                                        41,850

Administrative expenses                                                                              32,142

                                                                                                               73,992

Income before income tax                                                                             86,571

Other revenues and gains Unrealized gain on FV-OCI equity investments              36,000

 Dividend revenue                                                                                      40,000

                                                                                                               162,571

Income tax expense                                                                                      56,900

Net income                                                                                                $105,671

On Time Clock Company Inc.

Excerpt from Statement of Changes in Equity

For the Year Ended December 31, 2020

Retained earnings, January 1, 2020                                                            $216,000

Add: Net income for 2020                                                                            $105,671

 Gain on disposal of long-term investments                                                         31,400

                                                                                                                 $137,071

Deduct: Loss on expropriation                                                                           13,000

Correction of mathematical error (net of tax)                                                         17,186

                                                                                                                 (30,186)

                                                                                                                 106,885

Retained earnings, December 31, 2020                                                              $322,885

Instructions

Question a. Assume that On Time Clock Company follows IFRS. Assume that investments are accounted for as FV-OCI equity investments with gains/losses not recycled through net income. Prepare statement of financial performance showing expenses by function. Ignore calculation of EPS.

Question b. Prepare the retained earnings and accumulated other comprehensive income portion of the statement of changes in equity. Assume an opening balance of $120,000 in accumulated other comprehensive income.

Question c. Will the sum of the Accumulated Other Comprehensive Income and Retained Earnings at December 31, 2020, using the revised financial statement equal the sum of the Accumulated Other Comprehensive Income and the Retained Earnings balance from the original draft of the financial statement prepared by the controller? If not, explain any differences.