Lance Corporation had income from continuing operations of $900,000 (after taxes) in 2019. In addition, the...

Lance Corporation had income from continuing operations of $900,000 (after taxes) in 2019. In addition, the following information, which has not been considered, is as follows. 1. In 2019, Lance adopted the double-declining balance method of depreciating equipment. Prior to 2019, Vance had used the straight-line method. The change decreases income for 2019 by $60,000 (pre-tax) and the cumulative effect of the change on prior years' income was a $250,000 (pre-tax) decrease. 2. A machine was sold for $240,000 cash during the year at a time when its book value was $160,000. (Depreciation has been proper- ly recorded.) The company often sells machinery of this type. 3. Lance decided to discontinue its stereo division in 2019. During the current year, the loss on the disposal of the segment of the business was $180,000 less applicable taxes.

-Present in good form the income statement of Lance Corporation for 2019 starting with "income from continuing operations." Assume that Lance's tax rate is 40% and 100,000 shares of common stock were outstanding during the year.

Solutions

Expert Solution

Prepare the partial income statement as follows

LC Inc
Income Statement (Partial)
For the Year Ended December 31, 2019
Income from continuing operations - adjusted	$912,000
Discontinued operations:
Deduct: Loss on disposal of business, net of tax $180,000 × (1− 40%)	($108,000)
Income before cumulative effect of accounting changes	$804,000
Deduct: Cumulative effect of change in accounting principle, net of tax $250,000 × (1− 40%)	($150,000)
Net income	$654,000

Per share of common stock
Income from continuing operations ($912,000 ÷ 100,000)	$9.12
Discontinued operations, net of tax ($108,000 ÷ 100,000)	($1.08)
Income before cumulative effect of accounting changes ($804,000 ÷ 100,000)	$8.04
Change in accounting principle, net of tax ($150,000 ÷ 100,000)	($1.50)
Net income ($654,000 ÷ 100,000)	$6.54

Notes: Compute adjusted income from continuing operations as follows

Particulars	Amount
Unadjusted income from continuing operations	$900,000
Add: Gain on sale of machinery ($240,000 − $160,000) × (1− 40%)	$48,000
Deduct: Current effect of change in accounting principle $60,000 × (1− 40%)	($36,000)
Adjusted income from continuing operations	$912,000

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

For the year ending December 31, 2021, Olivo Corporation had income from continuing operations before taxes...

For the year ending December 31, 2021, Olivo Corporation had income from continuing operations before taxes of $1,380,000 before considering the following transactions and events. All of the items described below are before taxes and the amounts should be considered material. In November 2021, Olivo sold its PizzaPasta restaurant chain that qualified as a component of an entity. The company had adopted a plan to sell the chain in May 2021. The income from operations of the chain from January...

The Bridgeport Corporation had income from continuing operations of $12 million in 2020. During 2020, it...

The Bridgeport Corporation had income from continuing operations of $12 million in 2020. During 2020, it disposed of its restaurant division at a loss of $98,000 (net of tax of $38,000). Before the disposal, the division operated at a loss of $202,000 (net of tax of $135,000) in 2020. Blue Collar also had an unrealized gain-OCI of $44,000 (net of tax of $18,000) related to its FV-OCI equity investments. Bridgeport had 10 million common shares outstanding during 2020. Prepare a...

For the year ending December 31, 2021, Olivo Corporation had income from continuing operations before taxes of $1,200,000 before considering the following transactions and events.

For the year ending December 31, 2021, Olivo Corporation had income from continuing operations before taxes of $1,200,000 before considering the following transactions and events. All of the items described below are before taxes and the amounts should be considered material. 1. In November 2021, Olivo sold its PizzaPasta restaurant chain that qualified as a component of an entity. The company had adopted a plan to sell the chain in May 2021. The income from operations of the chain from January 1,...

5. For the year ending December 31, 2021, Olivo Corporation had income from continuing operations before...

5. For the year ending December 31, 2021, Olivo Corporation had income from continuing operations before taxes of $1,280,000 before considering the following transactions and events. All of the items described below are before taxes and the amounts should be considered material. In November 2021, Olivo sold its PizzaPasta restaurant chain that qualified as a component of an entity. The company had adopted a plan to sell the chain in May 2021. The income from operations of the chain from...

The Home Depot reported earnings from continuing operations before the provision for income taxes of $6,068...

The Home Depot reported earnings from continuing operations before the provision for income taxes of $6,068 million for the year ending January 29, 2012, in its 10-K. Footnote 6 revealed that the provision for income taxes was $2,185 million and that the current amount paid to the federal, state, and foreign governments was $1,950 million. 1. Compute the earnings from continuing operations after taxes. 2. Prepare the journal entry to record taxes on ordinary activities. Omit explanation. 3. Explain why...

The Home Depot reported earnings from continuing operations before the provision for income taxes of $6,068...

Brief Exercise 4-5 Bramble Corporation had income from operations of $6,285,800. In addition, it suffered an...

Brief Exercise 4-5 Bramble Corporation had income from operations of $6,285,800. In addition, it suffered an unusual and infrequent pretax loss of $781,200 from a volcano eruption, interest revenue of $15,910, and a write-down on buildings of $50,000. The corporation’s tax rate is 30%. Prepare a partial income statement for Bramble beginning with Income from operations. The corporation had 4,961,500 shares of common stock outstanding during 2017. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Tony Rich Inc. reported income from continuing operations before taxes during 2008 of $790,000.

Tony Rich Inc. reported income from continuing operations before taxes during 2008 of $790,000. Additional transactions occurring in 2008 but not considered in the $790,000 are as follows. 1. The corporation experienced an uninsured flood loss (extraordinary) in the amount of $80,000 during the year. The tax rate on this item is 46%. 2. At the beginning of 2006, the corporation purchased a machine for $54,000 (salvage value of $9,000) that had a useful life of 6 years. The bookkeeper...

The Talley Corporation had a taxable income of $300,000 from operations after all operating costs but...

The Talley Corporation had a taxable income of $300,000 from operations after all operating costs but before (1) interest charges of $30,000, (2) dividends received of $15,000, (3) dividends paid of $24,000, and (4) income taxes. What are the firm's income tax liability and its after-tax income? Round your answers to two decimal places. Income tax liability $ After-tax income $ What are the company's marginal and average tax rates on taxable income? Round your answers to two decimal places....

The Dakota Corporation had a 2015 taxable income of $27,500,000 from operations after all operating costs...

The Dakota Corporation had a 2015 taxable income of $27,500,000 from operations after all operating costs but before (1) interest charges of $8,000,000; (2) dividends received of $700,000; (3) dividends paid of $5,000,000; and (4) income taxes. a. Use the tax schedule in Table 2.3 to calculate Dakota’s income tax liability. (Round your answer to the nearest dollar amount.) Income tax liability $ b. What are Dakota’s average and marginal tax rates on taxable income? (Round your answers to the...

Subjects