Question 2: Emerald Comic Book Company had income before tax of $1,056,000 in Ye

Question

Question 2: Emerald Comic Book Company had income before tax of $1,056,000 in Year 1 before considering the following material items: 1.Emerald 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 $324,800. The division generated before-tax income from operations from the beginning of the year through disposal of $464,000. Neither the loss on disposal nor the operating income is included in the $1,056,000 before-tax income the company generated from its other divisions. 2.The company incurred restructuring costs of $75,000 during the year. Required Prepare a Year 1 income statement for Emerald beginning with income from continuing operations. Assume an income tax rate of 25%. Ignore EPS disclosures.

Explanation / Answer

EMERALD COMIC BOOK COMPANY

INCOME STATEMENT

EMERALD COMIC BOOK COMPANY

INCOME STATEMENT

Income before tax (before adjustment) 1056000 less:Restructuring cost (75000) Income before tax 981000 less:Income tax expense [981000*.25] (245250) Income from continuing operations 735750 Income/(loss)from discontinued operations income from discountinued operations ,net of tax [(464000-324800)(1-.25)] 104400 Net Income 840150

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