Ex 4-6 Chance company had two operating divisions one manufacturing farm equipme
ID: 2424010 • Letter: E
Question
Ex 4-6
Chance company had two operating divisions one manufacturing farm equipment and the other office supplies. both divisions are considered seperate componants as defined by gernerally excepted accounting principles. the farm equipment compentant had been unprofitable and on sept 1, 2016 the company adopted a plan to sell the assets of the division the actual sale was completed on dec 15 2016 at a price of 600,000 the book value of the divisions assets was 1,000,000 resulting in a before tax loss sale of 400,000 on the sale. the division inccured a before tax operating loss from operations of 130,000 from the begining of the year through dec 15 the income tax rate is 40%. chances after tax income from its continuing operations is 350,000.
required: prepare an income statement for 2016 begining with the income from continuing operations include appropiate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year.
Explanation / Answer
CHANCE COMPANY Income Statement For the Year Ended December 31, 2006 Income from continuing operations 350,000 Discontinued operations: Loss from operations of discontinued component (including loss on disposal of $400,000)* (530,000) Income tax benefit 212,000 Loss on discontinued operations (318,000) Net income 32,000 Earnings per share: Income from continuing operations 3.50 Loss from discontinued operations (3.18) Net income 0.32 Loss on discontinued operations: Loss on sale of assets (400,000.00) Operating loss (130,000.00) Total before-tax loss (530,000.00) Less: Income tax benefit (40%) 212,000.00 Net-of-tax loss (318,000.00)
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