The following are partial income statement account balances taken from the Decem

Question

The following are partial income statement account balances taken from the December 31, 2013, year-end trial balance of White and Sons, Inc.: restructuring costs, $450,000; interest revenue, $55,000; loss from earthquake (unusual and infrequent), $550,000; and loss on sale of investments, $65,000. Income tax expense has not yet been accrued. The income tax rate is 40%.

Prepare the lower portion of the 2013 income statement beginning with $925,000 income before income taxes and extraordinary item. Include appropriate basic EPS disclosures. The company had 150,000 shares of common stock outstanding throughout the year.

The following are partial income statement account balances taken from the December 31, 2013, year-end trial balance of White and Sons, Inc.: restructuring costs, $450,000; interest revenue, $55,000; loss from earthquake (unusual and infrequent), $550,000; and loss on sale of investments, $65,000. Income tax expense has not yet been accrued. The income tax rate is 40%.

Explanation / Answer

Lower Portion of Income Statement:

Income before income taxes and extraordinary item = $925000

Less: Income Tax (40%) = ($370000)

Income before extraordinary item = $555000

less: Loss from earthquake ($550000 * (1-0.40)) = ($330000)

Net Income = $225000

Basic EPS (Net Income / Number of shares) = $225000 / 150000 = $1.5

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