Summary Business Accounting

Question:

Esquire Comic Book Company had income before tax of $1,000,000 in 2013 before considering the

following material items:

1. Esquire sold one of its operating divisions, which qualified as a separate component according to

generally accepted accounting principles. The before-tax loss on disposal was $350,000. The division

generated beforetax income from operations from the beginning of the year through disposal of $500,000.

Neither the loss on disposal nor the operating income is included in the $1,000,000 before-tax income the

company generated from its other divisions.

2. The company incurred restructuring costs of $80,000 during the year.

Required:

Prepare a 2013 income statement for Esquire beginning with income from continuing operations. Assume

an income tax rate of 40%. Ignore EPS disclosures.



Answer:




ESQUIRE COMIC BOOK COMPANY

Partial Income Statement

For the Year Ended December 31, 2013



Income from continuing operations * ........................................................... $ 552,000



Discontinued operations:

Income from operations of discontinued component

(including loss on disposal of $350,000) ................................................. 150,000