Question

Esquire Comic Book Company had income before tax of $1,600,000 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 $400,000. The division generated before-tax income from operations from the beginning of the year through disposal of $620,000.

2. The company incurred restructuring costs of $65,000 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.)

2 Required: Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assum 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, 2021 eBook H Income from continuing operations Discontinued operations: Income from operations of discontinued component Income tax benefit Pin References Income (loss) on discontinued operations Net income (loss) < Prox 2 of 7 III Next > M Type here to search 0 8 . e 8 И Е R S KL

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Answer 1

ESQUIRE COMIC BOOK COMPANY
Partial Income Statement
For the year ended December 31, 2021
Income from continuing operations	$1,151,250
Discontinued operations gain/(loss):
Income from operations of discontinued component	$220,000
Income tax expense (220,000 * 25%)	$(55,000)
Income on discontinued operations	$165,000
Net income (1,151,250 + 165,000)	$1,316,250

Explanations:

Income from operations of discontinued component = $620,000 - $400,000 = $220,000

Income from continuing operations:
Income before considering additional items	$1,600,000
Decrease in income due to restructuring costs	(65,000)
Before tax income from continuing operations	1,535,000
Income tax expenses (25%)	383,750
Income from continuing operations	1,151,250