Question

Prada Corporation is a public retail company which follows IFRS. Justin Reece, the company’s controller, recently prepared an Income Statement and a Statement of Retained Earnings for the year ending December 31, 2020 (see below). Reece believes that both statements fairly present the company’s performance but confesses that he has not familiarized himself recently with the latest financial reporting standards under IFRS.

Prada Corporation uses a tax rate of 35% for all applicable items. Some items are shown on a before tax (or pre-tax) basis while other items are shown on an after-tax (or net of tax) basis.

PRADA CORPORATION

Income Statement (prepared by controller)

For the Year Ended December 31, 2020

Sales                                                                                                                                                               452,109

Cost of goods sold                                                                214,446

Selling expenses                                                                     81,305

Administrative expenses                                                         57,418                                                            353,169

Income before gains and (losses) and income tax      98,940                                                                                                          

Other gains and (losses)

      Gain on remeasurement of FV-OCI investment (pre-tax)      37,500

      Dividends received                                                           44,000                                                                        

      Correction for depreciation error made in 2019 (pre-tax)      (26,440)                                                           55,060

Income before income taxes      154,000                                                                                       

      Income tax expense      (53,900)                                                                                             (10,400)

Income before loss from tornado                                          100,100

      Loss from tornado (net of tax)      (10,400)                                                                                                                            

Net income                                                                                                                                                     $89,700

PRADA CORPORATION

Statement of Retained Earnings (prepared by controller)

For the Year Ended December 31, 2020

Retained Earnings – January 1, 2020                                                                                                          $155,000

Add:

      Net income                                                                      $89,700

      Loss due to write down of inventory (net of tax)             (9,100)                                                             80,600

Retained Earnings – December 31, 2020                                                                                                   $23 5,600

Additional information is as follows:

1. On January 1, 2020, the balance in the Accumulated Other Comprehensive Income account was $134,000.
2. During the year, additional common shares were issued for $100,000. On December 31, 2020, the common shares account had an ending balance of $515,000.
3. The weighted average number of common shares issued and outstanding throughout 2020 was 200,000 shares.

Required:

1. Prepare in good form a Statement of Comprehensive Income in multiple-step format for Prada Corporation for the year ending December 31, 2020.

2. Prepare in good form a Statement of Changes in Equity for Prada Corporation for the year ending December 31, 2020.

            Note:   Both statements must comply with IFRS reporting standards.

Answer 1

Prada Corporation
Statement of Comprehensive Income				Sales
(For the year ended December 31, 2020)				Cost of Goods Sold
					Selling Expenses
Particulars	$				Administrative Expenses
Sales	452109				Income before gain (loss) before income tax
Cost of Goods Sold	214446				Other gain (loss)
Gross Profit	237663				Gain on remeasurement of FV-OCI investment (pre-tax)
					Dividend
Other Income					Correction to depreciation error in previous year
Dividend	44000				Income before income tax
					Income Tax Expenses
Expenses					Income before loss from tornando
Selling Expenses	81305				Loss from tornando
Administrative Expenses	57418				Net Income
Profit before tax	142940
Tax expenses	50029		142940*35%
Profit (Loss )after tax from continuing operation	92911
Profit (Loss) from discontinuing operation	-10400
Profit (Loss) for the period	82511
Other Comprehensive Income
Items that will be reclassified to profit or loss
Gain on remeasurement of FV-OCI investment (pre-tax)	37500
Tax related to above	-13125		-37500*35%
Total Comprehensive Income for the period	106886
Earnings per equity share (for continuing operation):
Basic	0.46
Earnings per equity share (for discontinuing operation):
Basic	-0.05
Earnings per equity share(for discontinued & continuing operations)
Basic	0.41
Prada Corporation
Statement of Equity
(For the year ended December 31, 2020)
Particulars	Share Capital	Retained Earning	Comprehensive Income
Balance as on January 1, 2020	4,15,000	1,55,000	1,34,000
Share issued during the year	1,00,000
Current year comprehensive income		1,06,886
Prior period adjustment- depreciation error rectified			-26,440
Prior period adjustment- depreciation error rectified-Tax effect			9,254		=-26440*35%=9254
Loss due to w/off of inventory (net of tax)			-9,100
Balance as on December 31, 2020	5,15,000	2,61,886	1,07,714