Question

Esquire Comic Book Company had income before tax of $1,900,000 in 2021 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 $430,000. The division generated before tax income from operations from the beginning of the year through disposal of $680,000 2. The company incurred restructuring costs of $95,000 during the year. Required: Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 25% Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

	Esquire Comic Book Company
	Partial Income Statement
	For the year ended December 31, 2021
(a)	Income from continuing operations		$ 13,53,750
	Discountinued operations Gain/ (loss)
	Income from operations of discontinued component	$   2,50,000
Less:	Income tax expense @ 25%	$     -62,500
(b)	Income (loss) on discontinued operations		$   1,87,500
(a) + (b)	Net Income (loss)		$ 15,41,250
	Workings:
	Income from operations of discontinued component =	$680000 - $430000
	=	$   2,50,000
	Computation of Income from continuing operations:
	Income before considering additional items	$ 19,00,000
Less:	Decrease in income due to restructuring costs	$       95,000
	Before tax income from Discountinued operations	$ 18,05,000
Less:	Income tax expense @ 25%	$   4,51,250
	Income from continuing operations	$ 13,53,750