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Item 5

Item 5 2 points

Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2021, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2021, at a price of $680,000. The book value of the division’s assets was $1,170,000, resulting in a before-tax loss of $490,000 on the sale.

The division incurred a before-tax operating loss from operations of $180,000 from the beginning of the year through December 15. The income tax rate is 25%. Chance’s after-tax income from its continuing operations is $630,000.

Required:
Prepare an income statement for 2021 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)

Answer is not complete. $ 630,000 CHANCE COMPANY Partial Income Statement For the Year Ended December 31, 2021 Income from continuing operations Discontinued operations: Loss from operations of discontinued component Income tax benefit Loss on sale of assets Loss on discontinued operations Net income (loss) Earnings per share: Income from continuing operations Loss from discontinued operations Net income (180,000) X 122,500 (490,000) (547,500) 82,500 $ 6.30 $ 6.30

Answer 1

Chance Company 630000 Partial Income Statement For the Year Ended December 31, 2021 Income from continuing operations Discontinued operations gain (loss): Loss from operations of discontinued component Income tax benefit Loss on discontinued operations Net income Earnings per share: Income from continuing operations Loss from discontinued operations Net income -670000 167500 -502500 127500 6.3 -5.03 1.28

A 1 Chance Company 2 3 Partial Income Statement 4 For the Year Ended December 31, 2021 5 Income from continuing operations 630000 6 Discontinued operations gain (loss): 7 Loss from operations of discontinued component --490000-180000 8 Income tax benefit --C7*0.25 9 Loss on discontinued operations =SUM(C7:08) 10 Net income =C5+C9 11 Earnings per share: 12 Income from continuing operations C5/100000 13 Loss from discontinued operations =C9/100000 14 Net income =SUM(C12:013) 15