Question

Problem 4-5 (Algo) Income statement presentation; Restructuring costs; Discontinued operations; Accounting error [LO4-1, 4-3, 4-4, 4-5]

The preliminary 2021 income statement of Alexian Systems, Inc., is presented below:

ALEXIAN SYSTEMS, INC. Income Statement For the Year Ended December 31, 2021 ($ in millions, except earnings per share)
Revenues and gains:
Sales revenue	$	435
Interest revenue		10
Other income		132
Total revenues and gains		577
Expenses:
Cost of goods sold		251
Selling and administrative expense		146
Income tax expense		45
Total expenses		442
Net Income	$	135
Earnings per share	$	13.50

Additional information:

1. Selling and administrative expense includes $32 million in restructuring costs.
2. Included in other income is $125 million in income from a discontinued operation. This consists of $90 million in operating income and a $35 million gain on disposal. The remaining $7 million is from the gain on sale of investments.
3. Cost of Goods Sold in 2021 was increased by $5 million to correct an error in the calculation of 2020's ending inventory. The amount is material.

Required:
Prepare a revised income statement for 2021 reflecting the additional facts. Use a multiple-step format. Assume that an income tax rate of 25% applies to all income statement items, and that 10 million shares of common stock were outstanding throughout the year. (Enter your answers in millions rounded to 2 decimal places. Round EPS answers to 2 decimal places.)
  

Answer 1

Answer:  

Alexian Systems Inc. Income Statement For the year ended December 31, 2021
Particulars	Amount	Amount
Net Sales Revenue		435
Cost of Goods Sold ($251-$5)		246
Gross Profit		189
Operating Expenses:
Selling and Administrative ($146-$32)	114
Restructuring Cost	32
Total Operating Expenses		146
Operating Income		43
Other Income
Interest Revenue	10
Gain on sale of investment	7
Total Other Income		17
Income from continuing operations before Income Taxes		60
Income Tax Expense(60*25%)		15
Income From Continuing Operations		45
Discontinued Operations:
Income from Operation of Discontinued component	125
Income Tax Expense( $125 * 25%)	(31.25)
Income in discontinued Operations		93.75
Net Income		138.75
Earning Per Share:
Income from continuing operations (45/10)		4.5
Discontinued Operations (93.75/10)		9.375
Net Income (138.75/10)		13.875

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