Question

Chapter 12 Income and Changes in Retained Earnings proce as soldat 015. P ishine, Ine JP, publishes two newspapers and, until recently challam. 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 2018 extraordinary loss when its Raytown printing plant was damaged by a toma since been repaired. A condensed income statement follows: nado. The damage JACKSON PUBLISHING, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2015 $41.000.000 35,500,000 $ 4,500,000 Not 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... $(1,300,000) 4,700,000 3,400,000 $ 7.900.000 1600.000 $ 7300.000 Instructions On the basis of this information, answer the following questions. Show any necessary computa tions and explain your reason b. Assume that for 2016 you expect a 7 percent increase in the profitability of JPI's newspaper business but had projected a $2,000,000 operating loss for the baseball team if JPI had contin ued to operate the team in 2016, What amount would you forecast as JPES 2016 net income if the company had continued to own and operate 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 ndio stations. Late in the current year, the radio stations were sold to Times Publishing, Inc. Also dur 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 company had 3 million shares of common stock and a large quantity of convertible preferred to outstanding. Earnings per share reported for the current year were as follows: Earnings from continuing operations ..... Earnings before extraordinary items ...... Net earnings ........ Basic $8.20 $6.90 $3.60 Diluted $6.80 $5.50 $2.20

Answer 1

In 2007, JPI's newspaper business earned $4,500,000, as shown by the subtotal, Income from Continuing Operations. If the profitability of these operations increased by 7% in 2016, they would earn approximately $4,815,000 ($4,500,000 x 1.07 = $4,815,000). If the baseball team were still owned and lost $2,000,000 in 2016, JPI could be expected to earn a net income of about $2,815,000 in that year. Given that the baseball team was sold in 2015, JPI should earn a net income of approximately $4,815,000 in 2016, assuming that the profitability of the continuing newspaper operations increases by 7% ($4,500,000 x 1.07 = $4,815,000).