Question

Complex Income Statement The following items were derived from Woodbine Circle Corporation's adjusted trial balance on December 31, 2019: Debit Credit $500,000 1,500,000 2,500,000 15,100,000 Cash Accounts receivable, net Inventory Property, plant, and equipment Accumulated depreciation Accounts payable Income taxes payable Notes payable Common stock ($1 par value) Additional paid-in capital Retained earnings, January 1, 2019 Sales-regular Sales-AL Division Cost of sales-regular Cost of sales-AL Division Administrative expenses-regular Administrative expenses-AL Division Interest expense-regular Interest expense-AL Division Loss on sale of AL Division Gain on sale of land $4,900,000 2,200,000 200,000 1,000,000 1,000,000 5,800,000 3,000,000 10,100,000 2,000,000 6,200,000 900,000 2,000,000 300,000 210,000 140,000 250,000 300,000 Income tax expense 900,000 $30,500,000 $30,500,000

Answer 1

Find the income statement and schedules prepared below:

Explanation:

Income statement

S S 10,100,000 (6,200,000) 3.900.000 (2.000.000) 1,900,000 S WOODBINE CIRCLE CORPORATION Income Statement For the Year Ended December 31, 2019 Sales Cost of sales Gross profit Administrative expenses Operating income Other expense Gain on sale of land Interest expense Income from continuing operations before income taxes Income taxes (Schedule 1) Income from continuing operations Discontinued operations (Schedule 2) Operating income from discontinued AL Division S 396,000 (less applicable income taxes of S264.000) Loss on sale of AL Division (less applicable income tax saving of $100.000) (150.000) Net income S 300.000 (210.000) 1.990.000 (796.000) 1.194,000 S 246.000 1,440,000 $ EPS Components of Income Earnings per common share (1.000.000 common shares): From continuing operations From discontinued operations Net income 1.19 0.25 S 1.44
Required schedules:

Schedule 1: Income Taxes on Continuing Operations $1.990.000 Income from continuing operations before income taxes. Income tax rate Total income taxes on continuing operations x 40% $ 796.000

Schedule 2: Income from Operations of AL Division For the Nine Months Ended September 30, 2019 (Date of Discontinuance) Sales. $2.000.000 Cost of sales. (900,000 Gross profit $1.100.000 Administrative expenses. (300,000) Operating income S 800.000 Interest expense. (140,000) Income before income taxes. S 660,000 Income taxes (at 40%). (264,000) Income from operations of AL Division S 396.000

Note:

Loss on sale of division = Book value - sell value = 4250000 - 4000000 = 250000

Tax benefit on loss = 250000 * 40% = 100000

After-tax loss = 250000 - 100000 = 150000.

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