Esquire Comic Book Company had income before tax of $1,400,000 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 $380,000. The division generated before-tax income from operations from the beginning of the year through disposal of $580,000. The company incurred restructuring costs of $95,000 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 indicated with a minus sign.)

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23 June, 16:38

Esquire Comic Book Company had income before tax of $1,400,000 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 $380,000. The division generated before-tax income from operations from the beginning of the year through disposal of $580,000. The company incurred restructuring costs of $95,000 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 indicated with a minus sign.)

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Charlie Townsend · Answer 1

Income statement is prepared below.

Explanation:

Partial income statement

income from continuing operations = 978,750

Discontinued operations:

income from operations of discontinued component = 200,000

income tax expenses 25% of 200,000 = - 50000

income from operations of discontinued component = 150000

Net income = 1,128,750

Income from continuing operations

income before additional items = 1,400,000

less: restructuring cost - 95000

Income before tax = 1305,000

less: tax 25% = - 326,250

Income from continuing operations = 978,750