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13 January, 02:59

Esquire Comic Book Company had income before tax of $1,550,000 in 2021 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 $395,000. The division generated before-tax income from operations from the beginning of the year through disposal of $610,000. 2. The company incurred restructuring costs of $60,000 during the year. Required: Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 25%. Ignore EPS disclosures.

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  1. 13 January, 06:43
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    Esquire Comic Book Company

    Income Statement

    For the Year Ended December 31, 2021

    Operating income $1,550,000

    Restructuring costs ($60,000)

    Income from continuing operations b / Taxes $1,490,000

    Income tax expense ($372,500)

    Income from continuing operations $1,117,500

    Discontinued operations:

    Operating income $610,000 Loss on disposal ($395,000) Income tax on discontinued operations ($53,750)

    Income from discontinued operations $161,250

    Net income $1,278,750

    Explanation:

    Income from discontinued operations must be reported separately, but any restructuring costs must be included as operational expenses.
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