Verizon 10:01 PM a edugen.wileyplus.com Problem 4-3 Maher Inc. reported income f

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Verizon 10:01 PM a edugen.wileyplus.com Problem 4-3 Maher Inc. reported income from continuing operations before taxes during 2017 of $790,000. Additional transactions occurring in 2017 but not considered in the $790,000 are as follows 1. The corporation experienced an uninsured flood loss in the amount of $90,000 during the year. 2. At the beginning of 2015, the corporation purchased a machine for $54,000 (salvage value of $9,000) that had a Homework- Chapter 4 2 Exercise 4-11 4-4 useful life of 6 years. The bookkeeper used straight-line depreciation for 2015, 2016, and 2017, but failed to deduct the salvage value in computing the depreciation base. Review Score Review Results by Study Objective 3. Sale of securities held as a part of its portfolio resulted in a loss of $57,000 (pretax). 4 When its president died, the corporation realized $150,000 from an insurance policy. The cash surrender value of this 5. The corporation disposed of its recreational division at a loss of $115,000 before taxes. Assume that this transaction 6. The corporation decided to change its method of inventory pricing from average-cost to the FIFO method. The effect policy had been carried on the books as an investment in the amount of $46,000 (the gain is nontaxable). meets the criteria for discontinued operations. of this change on prior years is to increase 2015 income by $60,000 and decrease 2016 income by $20,000 before taxes. The FIFO method has been used for 2017. The tax rate on these items is 40%. Prepare an income statement for the year 2017 starting with income from continuing operations before taxes. Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 120,000 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.) (Round earnings per share to 2 decimal places, e.g. 1.48 and all other answers to 0 decimal places, e.g. 5,275.) MAHER INC. Income Statement (Partial)

Explanation / Answer

  

MAHER INC. INCOME STATEMENT (PARTIAL) FOR THE YEAR ENDED DECEMBER 31, 2017 ($) ($) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX 748500 INCOME TAX EXPENSE (193350) INCOME FROM CONTINUING OPERATIONS 555150 DISCONTINUED OPERATIONS LOSS FROM DISPOSAL OF RECREATIONAL DIVISION 115000 LESS:   APPLICABLE INCOME TAX REDUCTION 34500   80500) NET INCOME 474650 PER SHARE OF COMMON STOCK:         INCOME FROM CONTINUING OPERATIONS ($555150/120000) $4.63         DISCONTINUED OPERATIONS, NET OF TAX (0.67)         NET INCOME ($474650/120000) $3.96

  

COMPUTATION OF INCOME FROM CONT. OPERATIONS BEFORE TAXES:        AS PREVIOUSLY STATED 790000        LOSS ON SALE OF SECURITIES 57000        GAIN ON PROCEEDS OF LIFE INSURANCE POLICY ($150000-$46000) 104000        FLOOD LOSS 90000        ERROR IN COMPUTATION OF DEPRECIATION              AS COMPUTED ($54000/6) 9000              CORRECTED ($54000-$9000)/6 7500 1500         AS RESTATED 748500 COMPUTATION OF INCOME TAX:       INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 748500       NONTAXABLE INCOME (GAIN ON LIFE INSURANCE) 104000        TAXABLE INCOME 644500        TAX RATE 0.3        INCOME TAX (644500*0.30) 193350

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