Question

E Comic Book Company had income before tax of $1,950,000 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 $435,000. The division generated before-tax income from operations from the beginning of the year through disposal of $690,000.
2. The company incurred restructuring costs of $60,000 during the year.

  
Required:
Prepare a 2021 income statement for E 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:

Partial income statement
income from continuing operations	1417500
discontinued operations:
income from operations of discontinued component (690000-435000)	255000
income tax expenses @25% of 255000	-63750
income from operations of discontinued component	191250
Net income	1608750
Income from contnuing operations
income before additional items	1950000
less: restructuring cost	-60000
Income before tax	1890000
less: tax@ 25%	-472500
Income from contnuing operations	1417500