Question

Esquire Comic Book Company had income before tax of $1,800,000 in 2021 before considering the following material items:

1. 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 $420,000. The division generated before-tax income from operations from the beginning of the year through disposal of $660,000.
2. The company incurred restructuring costs of $85,000 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.

Answer 1

Esquire Comic Book Company

Partial Income Statement

For the year ended December 31, 2021

Income from continuing operations $1,800,000

Income tax expense ($450,000)

Net income from continuing operations $1,350,000

Discontinued operations Gain/Loss

Loss from disposal ($420,000)

Income from discontinued operations $660,000

Income taxes ($60,000) $180,000

Net income $1,530,000