Esquire Comic Book Company had income before tax of $1,450,000 in 2021 before considering the following...

Esquire Comic Book Company had income before tax of $1,450,000 in 2021 before considering the following material items:

Esquire sold one of its operating divisions, which qualified as a separate component according to generally accepted accounting principles. The before-tax loss on disposal was $385,000. The division generated before-tax income from operations from the beginning of the year through disposal of $590,000.
The company incurred restructuring costs of $50,000 during the year.

Required:
Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 25%. Ignore EPS disclosures. (Amounts to be deducted should be indicat with a minus sogn)

Expert Solution

Answer

Partial income statement
income from continuing operations	$ 1,050,000
discontinued operations:
income from operations of discontinued component (590000-385000)	$ 205,000
income tax expenses @25% of 205,000	-$ 51,250
income from operations of discontinued component	$ 153,750

Net income ( 1050000+153750)	$ 1,203,750


Income from continuing operations
income before additional items	$ 1,450,000
less: restructuring cost	-$ 50,000
Income before tax	$ 1,400,000
less: tax@ 25%	-$ 350,000
Income from continuing operations	$ 1,050,000

ekkarill92 answered 3 years ago

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