Question

Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2018, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2018, at a price of $660,000. The book value of the division's assets was $1,130,000, resulting In a before-tax loss of $470,000 on the sale. The division Incurred a before-tax operating loss from operations of $180,000 from the beginning of the year through December 15. The Income tax rate is 40%. Chance's after-tax Income from its continuing operations is $410,000. Required: Prepare an Income statement for 2018 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year. (Amounts to be deducted should be Indicated with a minus sign. Round EPS answers to 2 decimal places.) CHANCE COMPANY Partial Income Statement For the Year Ended December 31, 2018 Income from continuing operations Discontinued operations: 0 0 Earnings per share: $ 0.00

Answer 1

PAGE for the year ended December 31, 2018 for the year ended Dec 31, 2018 1 solution. Step 1. Preparation of Income statement. Income statement Particulars Amount. befor 683888.22 A (470000) Income from continuing operations (before tax ) (working Notes Less:- Expenses loss on sale of divisions Assets . operating loss notant Income before tax less: Income Pax, (40%. Taxdate) Net Income (After Pax) 180000) 33333-99 13333.33 20000 Step-2 Calculation of EPS Net Income after Tax $20 000 100 000 No. of shares. EPS = Net Income after Tax=80000 100000 No. of shares Pershore

DATE PAGE Woating Noto - Calculation of Income from continuing operations (before tax) After tax Income form continuing operation = $410600 Tax Rate =uo%. suppose, beforelax Income foom Continuing operation $100 Thono tax pate = 40% It means , tax amount = $100x40%. I$40 It means, After tax Income from Contining - $100-$40 operation As per question, After tax income frem contar continuing operations $ 410000 we can say for that, $60 = $ 410000 before tax Tacome form continuing operation is = $410000 X $100 $60. (Appoox.) 688888:33