Question

Esquire Comic Book Company had income before tax of $1,300,000 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 $380,000. The division generated before- tax income from operations from the beginning of the year through disposal of $560,000. Neither the loss on disposal nor the operating income is included in the $1,300,000 before-tax income the company generated from its other divisions. 2. The company incurred restructuring costs of $85,000 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.) ESQUIRE COMIC BOOK COMPANY Partial Income Statement For the Year Ended December 31, 2018 Income from continuing operations Discontinued operations gain (loss): Income from operations of discontinued component Income tax expense 0 0 Income on discontinued operations Net Income

Answer 1

	Esquire Comic Book Company
	Partial Income Statement
	For the year ended December 31, 2018
(a)	Income from continuing operations		$   7,29,000
	Discountinued operations Gain/ (loss)
	Income from operations of discontinued component	$   1,80,000
Less:	Income tax expense @ 40%	$     -72,000
(b)	Income on discontinued operations		$   1,08,000
(a) + (b)	Net Income		$   8,37,000
	Workings:
	Income from operations of discontinued component =	$560000 - $380000
	=	$   1,80,000
	Computation of Income from continuing operations:
	Income before considering additional items	$ 13,00,000
Less:	Decrease in income due to restructuring costs	$       85,000
	Before tax income from Discountinued operations	$ 12,15,000
Less:	Income tax expense @ 40%	$   4,86,000
	Income from continuing operations	$   7,29,000