Summary Business Accounting

Question:

Chance Company had two operating divisions, one manufacturing farm equipment and the other office

supplies.

Both divisions are considered separate components as defined by generally accepted accounting

principles. The farm equipment component had been unprofitable, and on September 1, 2013, the

company adopted a plan to sell the assets of the division. The actual sale was completed on December 15,

2013, at a price of $600,000. The book value of the division’s assets was $1,000,000, resulting in a

before-tax loss of $400,000 on the sale.

The division incurred a before-tax operating loss from operations of $130,000 from the beginning of the

year through December 15. The income tax rate is 40%. Chance’s after-tax income from its continuing

operations is $350,000.

Required:

Prepare an income statement for 2013 beginning with income from continuing operations. Include

appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout

the year.



Answer:




CHANCE COMPANY

Partial Income Statement

For the Year Ended December 31, 2013



Income from continuing operations ............................................................ $ 350,000

Discontinued operations: