Question

Hello, I am requesting help with two problems and an explanation for the correct answer. Thank you

#5

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 $790,000. The book value of the division's assets was $1,390,000, resulting in a before-tax loss of $600,000 on the sale. The division incurred a before-tax operating loss from operations of $270,000 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 $740,000 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.)

#7

Answer 1

REED COMPANY
Comparative Income Statements
For the Years Ended December 31
	2021	2020
Sales revenue (4750000-470000), (3850000-570000)	$4,280,000.00	$3,280,000.00
Cost of goods sold (2930000-325000), (2070000-362000)	$2,605,000.00	$1,708,000.00
Gross profit (loss) (A)	$1,675,000.00	$1,572,000.00
Less: Operating expenses:
Administrative (870000-57000) (745000-47000)	$813,000.00	$698,000.00
Selling (430000-27000), (372000-27000)	$403,000.00	$345,000.00
Loss from fire damage	$57,000.00
Loss from write-down of obsolete invenry	$40,000.00
tal operating expenses (B)	$1,313,000.00	$1,043,000.00
Operating income (C=A-b)	$362,000.00	$529,000.00
Other income (expense):
Interest revenue	$157,000.00	$147,000.00
Interest expense	-$214,000.00	-$214,000.00
tal other Income /expenses (net) (d)	-$57,000.00	-$67,000.00
Income from continuing operations before income taxes(E=C+d)	$305,000.00	$462,000.00
Less: Income tax expense (EX25%)	$76,250.00	$115,500.00
Income from continuing operations (F)	$228,750.00	$346,500.00
Discontinued operations:
Income (loss) from operations of discontinued component(61000-76000)	-$15,000.00	$134,000.00
Less: Income tax benefit (expense) @25%	-$3,750.00	$33,500.00
Income (loss) on discontinued operations (G)	-$11,250.00	$100,500.00
Net income (H=F+G)	$217,500.00	$447,000.00
Earnings per share:
Income from continuing operations (F/400000 Share)	$0.57	$0.87
Discontinued operations (G/400000 Share)	-$0.03	$0.25
Net income (H/400000 Share)	$0.54	$1.12