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Mila [183]
3 years ago
12

Esquire Comic Book Company had income before tax of $1,550,000 in 2021 before considering the following material items: 1. Esqui

re 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 $395,000. The division generated before-tax income from operations from the beginning of the year through disposal of $610,000. 2. The company incurred restructuring costs of $60,000 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.
Business
1 answer:
olga2289 [7]3 years ago
3 0

Answer:

                   Esquire Comic Book Company

                                Income Statement

                For the Year Ended December 31, 2021

Operating income                                                 $1,550,000

Restructuring costs                                                 ($60,000)

Income from continuing operations b/ Taxes     $1,490,000

<u>Income tax expense                                              ($372,500)</u>

Income from continuing operations                                        $1,117,500

Discontinued operations:

  • Operating income                                          $610,000
  • Loss on disposal                                          ($395,000)
  • <u>Income tax on discontinued operations       ($53,750)</u>

Income from discontinued operations                                     $161,250

<u>Net income                                                                             $1,278,750</u>

Explanation:

Income from discontinued operations must be reported separately, but any restructuring costs must be included as operational expenses.

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