Question

Esquire Comic Book Company had income before tax of $1,700,000 in 2021 before considering the following material items: 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 $410,000. The division generated before-tax income from operations from the beginning of the year through disposal of $640,000. The company incurred restructuring costs of $75,000 during the year. Required: Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 25%. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer:

Explanation:

In the income statement, the total revenues and the total expenses are recorded.  

If the total revenues are more than the total expenditure then the company earns net income

And, If the total revenues are less than the total expenditure then the company have a net loss

This net income or net loss would reflect in the statement of the retained earning account.  

The computation of income from continuing operations is shown below:

= Income before tax - restructuring costs - income tax expense

= $1,700,000 - $75,000 - $406,250

= $1,218,750

The income tax expense = (Income before tax - restructuring costs) × income tax rate

= ($1,700,000 - $75,000) × 25%

= $1,625,000  × 25%

= $406,250

The preparation of the income statement is presented in the spreadsheet. Kindly find the attachment below: