Question

Esquire Comic Book Company had income before tax of $1,400,000 in 2021 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 $380,000. The division generated before-tax income from operations from the beginning of the year through disposal of $580,000.
2. The company incurred restructuring costs of $95,000 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

Ans:

Partial income statement
income from continuing operations	978,750
discontinued operations:
income from operations of discontinued component	200,000
income tax expenses @25% of 200,000	-50000
income from operations of discontinued component	150000
Net income	1,128,750
Income from continuing operations
income before additional items	1,400,000
less: restructuring cost	-95000
Income before tax	1305,000
less: tax@ 25%	-326,250
Income from continuing operations	978,750

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