Question

Trayer Corporation has income from continuing operations of $290,000 for the year ended December 31, 2017. It also has the following items (before considering income taxes).

1. An unrealized loss of $80,000 on available-for-sale securities.

2. A gain of $30,000 on the discontinuance of a division (comprised of a $10,000 loss from operations and a $40,000 gain on disposal).

3. A correction of an error in last year’s financial statements that resulted in a $20,000 understatement of 2016 net income.

Assume all items are subject to income taxes at a 20% tax rate.

 

Instructions

Prepare a statement of comprehensive income, beginning with income from continuing operations.

Answer 1

Income from continuing operations		290,000
Discontinued operations:
Loss from operations of discontinued division, net of tax [10,000 x (1 - 0.20)]	(8,000)
Gain on sale of discontinued division, net of tax [40,000 x (1 - 0.20)]	32,000	24,000
Net Income		314,000
Unrealized loss on available for sale securities, net of tax [80,000 x (1 - 0.20)]		(64,000)
Comprehensive Income		250,000

Income from continuing operations		290,000
Discontinued operations:
Loss from operations of discontinued division, net of tax [10,000 x (1 - 0.20)]	(8,000)
Gain on sale of discontinued division, net of tax [40,000 x (1 - 0.20)]	32,000	24,000