Question

Esquire Comic Book Company had income before tax of $1,650,000 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 $405,000. The division generated before-tax income from operations from the beginning of the year through disposal of $630,000. 2. The company incurred restructuring costs of $70,000 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.) ESQUIRE COMIC BOOK COMPANY Partial Income Statement For the Year Ended December 31, 2021 Income from continuing operations Discontinued operations: Net income (loss)

Answer 1

Answer:

ESQUIRE COMIC BOOK COMPANY Partial income statement For the Year Ended December 31 2021
income from continuing operations	1185000
discontinued operations:
income from operations of discontinued component	225000
income tax expenses @25% of 225000	-56250
income from operations of discontinued component	168750
Net income	1353750

Working Notes:
Income from operations of discontinued component = $630000 - $405000 = $225000

Income from contnuing operations
income before additional items	1650000
less: restructuring cost	-70000
Income before tax	1580000
less: tax@ 25%	-395000
Income from contnuing operations	1185000