Question

E 4-7 Esquire Comic Book Company had income before tax of $1,000,000 in 2021 before considering the following Income statement material items: presentation; 1. Esquire sold one of its operating divisions, which qualified as a separate component according to gener- discontinued ally accepted accounting principles. The before-tax loss on disposal was $340,000. The division generated operations; before-tax income from operations from the beginning of the year through disposal of $500,000. restructuring 2. The company incurred restructuring costs of $80,000 during the year. costs • L04-1, LO4-3, Required: L04-4 Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 25%. Ignore EPS disclosures.

Answer 1

Required: Partial income statement

Income from continuing operations (A)	$690,000
Discontinued operations gain (loss):
Income from operations of discontinued component (500,000 - 340,000)	$160,000
Income tax expense (160,000*25%)	($40,000)
Income on discontinued operations (B)	$120,000
Net income (A + B)	$810,000

Working:

Income before considering material items	$1,000,000
(-) Restructing costs	($80,000)
Income before tax from continuing operations	$920,000
(-) Income tax expenses (25%)	($230,000)
Income from continuing operations	$690,000