Question

The following are partial income statement account balances taken from the December 31, 2021, year-end trial balance of White and Sons, Inc.: restructuring costs, $300,000; interest revenue, $40,000; before-tax loss on discontinued operations, $400,000; and loss on sale of investments, $50,000. Income tax expense has not yet been recorded. The income tax rate is 25%. Prepare the lower portion of the 2021 income statement beginning with $800,000 income from continuing operations before income taxes. Include appropriate EPS disclosures. The company had 100,000 shares of common stock outstanding throughout the year.

Answer 1

White and Sons, Inc.

The Lower Portion of the 2021 Income Statement of White and Sons, Inc.

Income from continuing operations $800,000

Interest revenue 40,000

Loss on discontinued operations, (400,000)

Loss on sale of investments (50,000)

Restructuring costs, (300,000)

Income before tax $90,000

Income tax (25%) (22,500)

Net income $67,500

Step-by-step explanation:

a) Data and Calculations:

Restructuring costs, $300,000

Interest revenue, $40,000

Before-tax loss on discontinued operations, $400,000

Loss on sale of investments, $50,000

Income tax rate = 25%

Income from continuing operations = $800,000

b) The restructuring costs of $300,000 are non-recurring costs incurred during the reorganization of White and Sons. They are reported as non-operating expenses. Similarly, realized gain or loss on the sale of an investment is reported in the income statement as a separate line item after continuing operations.