Sheffield Corp. has 149,910 shares of common stock outstanding. In 2020, the company reports income from...

Sheffield Corp. has 149,910 shares of common stock outstanding. In 2020, the company reports income from continuing operations before income tax of $1,221,100. Additional transactions not considered in the $1,221,100 are as follows.

1.		In 2020, Sheffield Corp. sold equipment for $36,200. The machine had originally cost $81,900 and had accumulated depreciation of $34,800. The gain or loss is considered non-recurring.
2.		The company discontinued operations of one of its subsidiaries during the current year at a loss of $196,200 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss from operations of the discontinued subsidiary was $92,300 before taxes; the loss from disposal of the subsidiary was $103,900 before taxes.
3.		An internal audit discovered that amortization of intangible assets was understated by $39,200 (net of tax) in a prior period. The amount was charged against retained earnings.
4.		The company recorded a non-recurring gain of $125,500 on the condemnation of some of its property (included in the $1,221,100).

Analyze the above information and prepare an income statement for the year 2020, starting with income from continuing operations before income tax. Compute earnings per share as it should be shown on the face of the income statement. (Assume a total effective tax rate of 19% on all items, unless otherwise indicated.) (Round earnings per share to 2 decimal places, e.g. 1.47.)

SHEFFIELD CORP. Income Statement (Partial) December 31, 2020For the Year Ended December 31, 2020For the Quarter Ended December 31, 2020
Income TaxDiscontinued OperationsDividendsEarnings Per ShareExpensesGain on CondemnationIncome From Continuing OperationsIncome From Continuing Operations Before Income TaxNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesLoss from Disposal of SubsidiaryLoss from Operations of Discontinued Subsidiary			$
Income TaxDiscontinued OperationsDividendsEarnings Per ShareExpensesGain on CondemnationIncome From Continuing OperationsIncome From Continuing Operations Before Income TaxNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesLoss from Disposal of SubsidiaryLoss from Operations of Discontinued Subsidiary
Income TaxDiscontinued OperationsDividendsEarnings Per ShareExpensesGain on CondemnationIncome From Continuing OperationsIncome From Continuing Operations Before Income TaxNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesLoss from Disposal of SubsidiaryLoss from Operations of Discontinued Subsidiary
Income TaxDiscontinued OperationsDividendsEarnings Per ShareExpensesGain on CondemnationIncome From Continuing OperationsIncome From Continuing Operations Before Income TaxNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesLoss from Disposal of SubsidiaryLoss from Operations of Discontinued Subsidiary
Income Tax Discontinued Operations Dividends Earnings Per Share Expenses Gain on Condemnation Income From Continuing Operations Income From Continuing Operations Before Income Tax Net Income / (Loss) Retained Earnings, January 1 Retained Earnings, December 31 Revenues Loss from Disposal of Subsidiary Loss from Operations of Discontinued Subsidiary	$
Add Less : Applicable Income Tax ReductionDiscontinued OperationsDividendsEarnings Per ShareExpensesGain on CondemnationIncome From Continuing OperationsIncome From Continuing Operations Before Income TaxNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesLoss from Disposal of SubsidiaryLoss from Operations of Discontinued Subsidiary		$
Income Tax Discontinued Operations Dividends Earnings Per Share Expenses Gain on Condemnation Income From Continuing Operations Income From Continuing Operations Before Income Tax Net Income / (Loss) Retained Earnings, January 1 Retained Earnings, December 31 Revenues Loss from Disposal of Subsidiary Loss from Operations of Discontinued Subsidiary
Add Less : Applicable Income Tax ReductionDiscontinued OperationsDividendsEarnings Per ShareExpensesGain on CondemnationIncome From Continuing OperationsIncome From Continuing Operations Before Income TaxNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesLoss from Disposal of SubsidiaryLoss from Operations of Discontinued Subsidiary

Income TaxDiscontinued OperationsDividendsEarnings Per ShareExpensesGain on CondemnationIncome From Continuing OperationsIncome From Continuing Operations Before Income TaxNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesLoss from Disposal of SubsidiaryLoss from Operations of Discontinued Subsidiary			$
Income TaxDiscontinued Operations, Net of TaxDividendsEarnings Per ShareExpensesGain on CondemnationIncome From Continuing OperationsIncome From Continuing Operations Before Income TaxNet Income / (Loss)Retained Earnings, January 1Retained Earnings, December 31RevenuesLoss from Disposal of SubsidiaryLoss from Operations of Discontinued Subsidiary :
Income Tax Discontinued Operations, Net of Tax Dividends Earnings Per Share Expenses Gain on Condemnation Income From Continuing Operations Income From Continuing Operations Before Income Tax Net Income / (Loss) Retained Earnings, January 1 Retained Earnings, December 31 Revenues Loss from Disposal of Subsidiary Loss from Operations of Discontinued Subsidiary			$
Income Tax Discontinued Operations, Net of Tax Dividends Earnings Per Share Expenses Gain on Condemnation Income From Continuing Operations Income From Continuing Operations Before Income Tax Net Income / (Loss) Retained Earnings, January 1 Retained Earnings, December 31 Revenues Loss from Disposal of Subsidiary Loss from Operations of Discontinued Subsidiary
Income Tax Discontinued Operations, Net of Tax Dividends Earnings Per Share Expenses Gain on Condemnation Income From Continuing Operations Income From Continuing Operations Before Income Tax Net Income / (Loss) Retained Earnings, January 1 Retained Earnings, December 31 Revenues Loss from Disposal of Subsidiary Loss from Operations of Discontinued Subsidiary			$

Solutions

Expert Solution

Sheffield Corp
Income Statement (Partial)
For the Year 2020
Income from continuing operations before income tax			$1,210,200
Less: Income tax @ 19%			$ 229,938
Income from continuing operations after income tax			$ 980,262
Discontinued operations:
Loss from operations of discontinued operations	$ 92,300
Less: Applicable income tax reduction @ 19%	$ 17,537	$ 74,763
Loss from sale of discontinued operations	$ 103,900
Less: Applicable income tax reduction@ 19%	$ 19,741	$ 84,159
Loss from discontinued operations, net of tax			$ 158,922
Income before extraordinary item			$ 821,340
Extraordinary item:
Gain on condemnation		$125,500
Less: Applicable income tax @ 19%		$ 23,845
Extraordinary gain, net of tax			$ 101,655
Net income			$ 922,995

Earnings per share:
Income from continuing operations			6.54
Loss from discontinued operations			1.06
Income before extraordinary item			5.48
Extraordinary gain			0.68
Net income			6.16

Income from continuing operations before income tax	$1,210,200
1221100-(81900-34800-36200)

ekkarill92 answered 1 year ago

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