Wade Corp has 150000 shares of common stock outstanding In 2

Wade Corp. has 150,000 shares of common stock outstanding. In 2017, the company reports income from continuing operations before income tax of $1,210,000. Additional transactions not considered in the $1,210,000 are as follows.

Analyze the above information and prepare an income statement for the year 2017, 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. 1.47.)

1.		In 2017, Wade Corp. sold equipment for $40,000. The machine had originally cost $80,000 and had accumulated depreciation of $30,000. The gain or loss is considered non-recurring.
2.		The company discontinued operations of one of its subsidiaries during the current year at a loss of $190,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss from operations of the discontinued subsidiary was $90,000 before taxes; the loss from disposal of the subsidiary was $100,000 before taxes.
3.		An internal audit discovered that amortization of intangible assets was understated by $35,000 (net of tax) in a prior period. The amount was charged against retained earnings.
4.		The company had a non-recurring gain of $125,000 on the condemnation of some of its property (included in the $1,210,000).

Solution

Income from continuing operations before tax $        1,210,000 Less: income Tax [1210000*0.38] $            459,800 Income from continuing operations $            750,200 Discontinued Operations Loss from operations of discontinued subsidiary $          90,000 Less: Applicable income tax reduction [ 90000*.38] $          34,200 $          55,800 Loss from disposal of subsidiary $        100,000 Less: Applicable income tax reduction [100000*.38] $          38,000 $          62,000 Loss from discontinued operations (net of tax) $            117,800 Income before extraordinary item $            632,400 Extraordinary Item Gain on condemnation $        125,000 Less: Applicable tax $          47,500 $              77,500 Net Income $            709,900 Per Share of Common Stock: Income from continuing operations                   5.00 [$750200/150000 shares] Loss from discontinued operations (net of tax)                 (0.79) [$117800/150000 shares] Income before extraordinary item                   5.79 Extraordinary Gain (net of tax)                   0.52 [$77500/150000 shares] Net Income                   6.30