Question

The following information relates to Husk Corn Co. for the year ended December 31, 2018:

The company tells you that Income from Continuing Operations PRE Taxes is $ 300,000. However, this amount was computed before the company considered these items: (i.e. none of the items listed below are factored into the $300,000)

• Restructuring Costs incurred in 2018 were $25,000
• When recording depreciation expense for the previous year (2017), they mistakenly recorded depreciation twice for the same asset. The amount of the error was $15,000 after taxes. The error had no effect on the amount of depreciation expense recorded in 2018.
• As a result of some stronger credit policies put in place in 2018, Husk Corn Co. decided to reduce the percentage used in the calculation of bad debts expense from 2% of net sales to 1.5% of net sales. These new percentages resulted in bad debt expense of $8,000 for the year-ended 2018. (Again, this change in estimate information is not included as part of the $300,000 above. i.e. there is no bad debt expense included as part of the $300,000 amount.)
• On October 1, 2018, the company sold Division B, a major component of the business which had been unprofitable for the past several years. Husk Corn Co. reported a loss of $20,000 on Division B during the first 9 months of the year while it was still in operations. They were able to sell the assets of the division before the end of 2018. However, the sale resulted in a loss of $40,000.
• Husk Corn Co. incurred a loss from a write-down of obsolete inventory of $10,000 during 2018.
• Gains on foreign currency exchange during 2018 were $20,000, which affects comprehensive income only.  

1. What is the correct amount that should appear on the Husk Corn Co. income statement as "Income from Continuing Operations before Taxes"?

2. Prepare the 2018 partial income statement for Husk Corn Co. beginning with "Income from Continuing Operations before Taxes".  Assume that your answer in part 1 above was $250,000 for purposes of this question. Assume an income tax rate of 25%. Do not complete the comprehensive income portion.

3. Assuming there are $50,000 shares of common stock outstanding at year-end, what is Husk Corn Co's net income per share (EPS)?

Show all work please.

Answer 1