Wade Corp. has 150,000 shares of common stock outstanding. In 2017, the company reports income from continuing operations before income tax of $1,210,000. Additional transactions not considered in the $1,210,000 are as follows.
1. In 2017, Wade Corp. sold equipment for $40,000. The machine had originally cost $80,000 and had accumulated depreciation of $30,000. The gain or loss is considered non-recurring.
2. The company discontinued operations of one of its subsidiaries during the current year at a loss of $190,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss from operations of the discontinued subsidiary was $90,000 before taxes; the loss from disposal of the subsidiary was $100,000 before taxes.
3. An internal audit discovered that amortization of intangible assets was understated by $35,000 (net of tax) in a prior period. The amount was charged against retained earnings.
4. The company recorded a non-recurring gain of $125,000 on the condemnation of some of its property (included in the $1,210,000).
Analyze the above information and prepare an income statement for the year 2017, starting with income from continuing operations before income tax. Compute earnings per share as it should be shown on the face of the income statement. (Assume a total effective tax rate of 38% on all items, unless otherwise indicated.)
The net income of the company is $701,200.
Earnings per share is $4.67.
Net income is the amount that a company contains after making the payment of all its expenses from the revenues. The settlement of expenses includes both operating and non-operating expenses.
In the books of Wade Corporation
For the year ended December 31, 2017
Income from continuing operations before tax (1,210,000-10,000)
Less: Income tax @ 38%
Income from continuing operations after tax
Loss from discontinued subsidiary’s operation
Less: Income tax @ 38%
Loss from subsidiary disposal
Less: Income tax
Loss from discontinued operations
Income before extraordinary item
Gain on condemnation of property
Per share earning
Income from continuing operations (744,000/150,000)
Loss from discontinued operations (117,800/150,000)
Extraordinary gain (125,000/150,000)
Net income (701,200/150,000)
Roxanne Carter Corporation reported the following for 2017: net sales $1,200,000, cost of goods sold $750,000, selling and administrative expenses $320,000, and an unrealized holding gain on available-for-sale securities $18,000.
Prepare a statement of comprehensive income, using (a) the one statement format and (b) the two statement format. (Ignore income taxes and earnings per share.)
The following information was taken from the records of Roland Carlson Inc. for the year 2017: income tax applicable to income from continuing operations $187,000, income tax applicable to loss on discontinued operations $25,500, and unrealized holding gain on available-for-sale securities (net of tax) $15,000.
Gain on sale of equipment $95,000 Cash dividends declared $150,000
Loss on discontinued operations75,000 Retained earnings January1,2017 600,000
Administrative expenses 240,000 Cost of goods sold 850,000
Rent revenue 40,000 Selling expenses 300,000
Loss on write-down of inventory 60,000 Sales revenue 1,900,000
Shares outstanding during 2017 were 100,000.
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