Question

Chapter 12 Income and Changes in Retained Earnings owned a pool profe Jackson Publishing, Inc. (JP), publishes two newspapers and, until recently haschall team. The baseball team had been losing money for several years and of 2015 to a group of investors who plan to move it to a larger city. Also in 2015 extraordinary loss when its Raytown printing plant was damaged by a tornado T since been repaired. A condensed income statement follows: 2015. Pl suo ado. The damage JACKSON PUBLISHING, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2015 $41,000,000 36.500.000 $ 4.500.000 Net revenue ... Costs and expenses..... Income from continuing operations. Discontinued operations: Operating loss on baseball team ... Gain on sale of baseball team ...... Income before extraordinary items. Extraordinary loss: Tornado damage to Raytown printing plant.... Net income.. S(1,300,000) 4,700,000 3.400.000 $ 7,900.000 (600.000 $ 7.300.000 Instructions On the basis of this information, answer the following questions. Show any necessary compute tions and explain your reasoning. What would JPI's net income have been for 2015 if it had not sold the baseball team? C. Given your assumptions in part b, but given that JPI did sell the baseball team in 2015, what would you forecast as the company's estimated net income for 2016? For many years New York Studios has produced television shows and operated several FM radio stations. Late in the current year, the radio stations were sold to Times Publishing, Inc. Also dute ing the current year, New York Studios sustained an extraordinary loss when one of its camera trucks caused an accident in an international grand prix auto race. Throughout the current year, the company had 3 million shares of common stock and a large quantity of convertible preferred stoc outstanding. Earnings per share reported for the current year were as follows: Basic Diluted Earnings from continuing operations Earnings before extraordinary items Net earnings ....... $8.20 $6.90 $3.60 $6.80 $5.50 $2.20

Answer 1

Answer to Part a)

Net Income given as per Income Statement for the year ended December 31, 2015

Net Income = $ 7,300,000

Less: Gain on sale of baseball team = $ (4,700,000)

= $ 7,300,000 - $ 4,700,000 = $ 2,600,000

Net income have been for 2015 if it had not sold the baseball team is $ 2,600,000

Explanation: If company will not sale its baseball team then company will earn gain on sale of baseball team, hence gain on sale of baseball team $ 4,700,000 subtracted from net income but company will suffer operating loss on baseball team irrespective its sold by company or not.

Part c is based on part b and part b is not visible.