Question

Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2021, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2021, at a price of $630,000. The book value of the division’s assets was $1,070,000, resulting in a before-tax loss of $440,000 on the sale. The division incurred a before-tax operating loss from operations of $160,000 from the beginning of the year through December 15. The income tax rate is 25%. Chance’s after-tax income from its continuing operations is $580,000. Required: Prepare an income statement for 2021 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.)

Answer 1

income statement
for the year ended Dec 31 2021
income from continuing operations(A)			580000
discontinued operations:
loss from operation of discontinued component-working		-600000
Income tax benefit	(600000*25%)	150000
loss on discontinued operations(B)			-450000
net income(A+B)			130000
earnings per share		580000/100000	5.8
income from continuing operations(A)
gain(loss) from discontinued operations		450000/100000	-4.5
Net income(LOSS)/share			1.3
Earnings per share			1.3$
Working:
loss from operation of discontinued component-working
sale value of the division			630000
book value of the assets of the segment			1070000
gain/loss on sale			-440000
loss from operation of the division			-160000
loss from operation of discontinued component-working			-600000

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