Question

Esquire Comic Book Company had income before tax of $1,500,000 in 2018 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 $400,000. The division generated before-tax income from operations from the beginning of the year through disposal of $600,000. Neither the loss on disposal nor the operating income is included in the $1,500,000 before-tax income the company generated from its other divisions. 2. The company incurred restructuring costs of $55,000 during the year. Required: Prepare a 2018 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 40% Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

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Esquire Comic Book Company
Partial Income Statement
For the Year Ended December 31, 2018
Income before tax from continuing operations	1500000
Restructuring Costs	-55000
Income before Tax from Continuing Operations	1445000
Less: Taxes @25%	-578000
Net Income from Continuing Operations		867000
Discounted operations:
Before Tax Loss on Disposal	-400000
Before tax income from Discontinued Operations	600000
Income before Tax from Discontinuing Operations	200000
Less: Taxes @40%	-80000
Net Income from Discontinuing Operations		120000
Net Income of Company		987000