Question

1. 2. Whispering Inc. reported income from continuing operations before taxes during 2020 of $793,700. Additional transactions occurring in 2020 but not considered in the $793,700 are as follows. The corporation experienced an uninsured flood loss in the amount of $91,900 during the year. At the beginning of 2018, the corporation purchased a machine for $70,200 (salvage value of $11,700) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2018, 2019, and 2020, but failed to deduct the salvage value in computing the depreciation base. 3. Sale of securities held as a part of its portfolio resulted in a loss of $60,900 (pretax). When its president died, the corporation realized $142,600 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $46,110 (the gain is nontaxable). The corporation disposed of its recreational division at a loss of $103,520 before taxes. Assume that this transaction meets the criteria for discontinued operations. The corporation decided to change its method of inventěry pricing from average-cost to the FIFO method. The effect of this change on prior years is to increase 2018 income by $54,040 and decrease 2019 income by $19,040 before taxes. The FIFO method has been used for 2020. The tax rate on these items is 30%. 4. 5. 6. Prepare an income statement for the year 2020 starting with income from continuing operations before taxes. Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 111,840 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.) (Round earnings per share to 2 decimal places, e.g. 1.48 and all other answers to 0 decimal places, e.g. 5,275.) WHISPERING INC. Income Statement (Partial) For the Year Ended December 31, 2020 Income From Continuing Operations

Answer 1

WHISPERING INC Amount in $ Income Statement (For the year ended December 31,2020) Income from Continuing operation before income tax 7,93,700 Income tax 2,38,110 less Income from Continung operations 5,55,590 Less Discontinued operations: loss from disposal of recreational division less Applicable income tax reduction 1,03,520 31,056 72,464 Less 91,900 27,570 64,330 major Casualty loss Uninsured flood loss less Applicable income tax reduction Major loss loss on Sale of securities Applicable income tax reduction Less less 60,900 18,270 42,630 Add 5,850 1,755 4,095 Add Excess depreciation charged in earlier and current year less Applicable income tax reduction change in method of inventory valuations for 2018 less for 2019 net gain. less Applicable income tax reduction Gain from Insurance Policy (Since gain is not taxable hence full gain considered) 54,040 19,040 35,000 10,500 24,500 - Add 96,490 Net Income Shares outstanding 5,01,251 1,11,840 Earning per share 4.48

Depreciation workings Purchase price 70200 salvage value 11700 life 6years depreciation to be charged 58500 depreciation charged 9750 11700 1950 difference for lyear for 2018, 2019 and 2020 5850