Chapter 7
Corporations: The Financial Statements
375
Case Study
CS-1 (
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Kruma Company sells clothes and fashion accessories through its chain of retail stores.
The shareholders’ equity section of Kruma Company’s statement of financial position as at
December 31, 2016 shows the following information.
Kruma Company
Statement of Financial Position (partial)
As at December 31, 2016
Shareholders' Equity
Preferred Shares, non-cumulative, $3,
100,000 shares authorized, 40,000 shares issued $1,200,000
Common Shares, unlimited shares authorized,
400,000 shares issued and outstanding
1,600,000
Retained Earnings
1,500,000
Total Shareholders' Equity
$4,300,000
On January 28, 2017, Kruma discovered an accounting mistake made in 2016. Accrual of
interest revenue was understated by $54,000 because interest receivable and interest revenue
of $60,000 were mistakenly recorded as $6,000.
During 2017, Kruma earned and incurred the following revenue and expenses (excluding
income tax expenses). Kruma’s tax rate is 30%.
Sales Revenue
$1,785,000
Interest Revenue
45,000
Gain on Value of Investments
12,000
Gain on Sale of Assets from Discontinued Operations
90,000
Loss on Sale of Assets from Continuing Operations
16,000
Loss on Foreign Currency Translation
30,000
Operating Loss from Discontinued Operations
200,000
Cost of Goods Sold
966,000
Salaries Expense
250,000
Depreciation Expense
174,000
Miscellaneous Operating Expenses
80,000
