Question

Esquire Comic Book Company had income before tax of $1,000,000 in 2016 before considering the following material items:

Answer 1

Answer:

                    Esquire Comic Book Company

                               Income Statement

               For the Year Ended December 31, 2016

Operating income                                                $1,000,000

Restructuring costs                                                 ($80,000)

Income from continuing operations b/ Taxes      $920,000

Income tax expense                                              ($368,000)

Income from continuing operations                                        $552,000

Discontinued operations:

• Operating income                                         $500,000
• Loss on disposal                                          ($350,000)
• Income tax on discontinued operations      ($60,000)

Income from discontinued operations                                     $90,000

Net income                                                                               $642,000

Explanation:

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