Esquire Comic Book Company had income before tax of $1,250,000 in 2016 before considering the following material items: 1. Esquire sold one of its operating divisions, which qualified as a separate component according to generally accepted accounting principles. The before-tax loss on disposal was $375,000. The division generated before-tax income from operations from the beginning of the year through disposal of $550,000. Neither the loss on disposal nor the operating income is included in the $1,250,000 before-tax income the company generated from its other divisions. 2. The company incurred restructuring costs of $80,000 during the year. Required: Prepare a 2016 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 40%. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)
Esquire Comic Book Company had income before tax of $1,250,000 in 2016 before considering the following material items: 1. Esquire sold one of its operating divisions, which qualified as a separate component according to generally accepted accounting principles. The before-tax loss on disposal was $375,000. The division generated before-tax income from operations from the beginning of the year through disposal of $550,000. Neither the loss on disposal nor the operating income is included in the $1,250,000 before-tax income the company generated from its other divisions. 2. The company incurred restructuring costs of $80,000 during the year. Required: Prepare a 2016 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 40%. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)
Related questions
Kandon Enterprises, Inc., has two operating divisions; onemanufactures machinery and the other breeds and sells horses. Bothdivisions are considered separate components as defined bygenerally accepted accounting principles. The horse division hasbeen unprofitable, and on November 15, 2016, Kandon adopted aformal plan to sell the division. The sale was completed on April30, 2017. At December 31, 2016, the component was considered heldfor sale. |
On December 31, 2016, thecompanyâs fiscal year-end, the book value of the assets of thehorse division was $415,000. On that date, the fair value of theassets, less costs to sell, was $350,000. The before-tax loss fromoperations of the division for the year was $290,000. The companyâseffective tax rate is 40%. The after-tax income from continuingoperations for 2016 was $550,000. |
| Required: | |
| 1. | Prepare a partial income statement for 2016 beginning withincome from continuing operations. Ignore EPS disclosures.(Amounts to be deducted should be indicated with a minussign.) 2. Prepare a partial income statement for 2016beginning with income from continuing operations. Assuming that theestimated net fair value of the horse divisionâs assets was$700,000, instead of $350,000. Ignore EPS disclosures.(Amounts to be deducted should be indicated with a minussign.) |
Income Statement Sections
During the current year, Dale Corporation incurred an extraordinarytornado loss of $330,000 and sold a segment of its business at again of $199,000. Until it was sold, the segment had a currentperiod operating loss of $78,000. Also, the company discovered thatan error caused last year's ending inventory to be understated by$34,000 (a material amount). The company had $830,000 income fromcontinuing operations for the current year. Prepare the lower partof the income statement, beginning with the $830,000 income fromcontinuing operations. Follow tax allocation procedures, assumingthat all changes in income are subject to a 40 percent income taxrate. Disregard earnings per share disclosures.
| Income from Continuing Operations | $Answer | |
| Discontinued Operations | ||
| Loss from operations of discontinued segment | $Answer | |
| Gain on disposal of discontinued segment | Answer | Answer |
| Income before Extraodinary Item | Answer | |
| Extraordinary Item | ||
| Tornado Loss | Answer | |
| Net Income | $AnswerIncorrect 0.00 points out of 1.00 |
