Wade Corp. has 149,500 shares of common stock outstanding. In 2014, the company
ID: 2489094 • Letter: W
Question
Wade Corp. has 149,500 shares of common stock outstanding. In 2014, the company reports income from continuing operations before income tax of $1, 210,500. Additional transactions not considered in the $1, 210,500 are as follows. In 2014, Wade Corp. sold equipment for $36,000. The machine had originally cost $80,200 and had accumulated depreciation of $32,500. The gain or loss is considered ordinary. The company discontinued operations of one of its subsidiaries during the current year at a loss of $192,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss from operations of the discontinued subsidiary was $90,200 before taxes; the loss from disposal of the subsidiary was $101,800 before taxes. An internal audit discovered that amortization of intangible assets was understated by $36,300 (net of tax) in a prior period. The amount was charged against retained earnings. The company had a gain of $129,300 on the condemnation of much of its property. The gain is taxed at a total effective rate of 40%. Assume that the transaction meets the requirements of an extraordinary item. Analyze the above information and prepare an income statement for the year 2014, starting with income from continuing operations before income tax. Compute earnings per share as it should be shown on the face of the income statement. (Assume a total effective tax rate of 38% on all items, unless otherwise indicated.) (Round earnings per share to 2 decimal places, e.g. 1.48.)Explanation / Answer
Income statement is prepared as under:
Earning per share is as follows:
Wade Corporation Income Statement For the year ended December 31, 2014 Particulars Amount ($) Amount ($) Income from continuing operations before tax 11,98,800 Income tax 38% 455544 Income from continuing operations after tax 7,43,256 Discontinued operations: loss from operations of discontinued subsidiary 90,200 Income taxes 34276 55,924 loss from disposal of discontinued subsidiary 1,01,800 Income taxes 38684 63,116 Loss from discontinued operation net of tax 1,19,040 Income before extraordinary item 6,24,216 Gain on condemnation net of tax 77,580 Net Income 7,01,796Related Questions
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