Question

Income statement presentation; discontinued operations; restructuring charges [LO4-1, 4-3, 4-4]Esquire Comic Book Company had income before tax of $1,400,000 in 2016 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 $390,000. The division generated before-tax income from operations from the beginning of the year through disposal of $580,000. Neither the loss on disposal nor the operating income is included in the $1,400,000 before-tax income the company generated from its other divisions.2. The company incurred restructuring costs of $95,000 during the year.Required:Prepare a 2016 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 40%. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

$897,000

Step-by-step explanation:

Preparation 2016 income statement for Esquire

First step is to calculate the Income from continuing operations

Income from continuing operations

income before additional items $1,400,000

Less: restructuring cost -$95,000

Income before tax $ 1,305,000

($1,400,000-$95,000)

Less: tax 40% -$522,000

Income from continuing operations $783,000

($1,305,000-$522,000)

Now let Prepare 2016 INCOME STATEMENT for Esquire

ESQUIRE COMIC BOOK COMPANY

Partial income statement

For the Year Ended December 31 2016

Income from continuing operations $783,000

Discontinued operations:

Income from operations of discontinued component $ 190,000

($580,000-$390,000)

Less Income tax expenses $76,000

( 40% of $190,000)

Income from operations of discontinued component $114,000

($190,000-$76,000)

Net income $897,000

($783,000+$114,000)

Therefore 2016 income statement for Esquire will be $897,000