P4-3 (Irregular Items) Maher Inc. reported income from continuing
operations before taxes during2014 of $790,000. $790,000 Additional
transactions occurring in 2014 but not considered in the $790,000 are as
follows.
1. The
corporation experienced an uninsured flood loss (extraordinary) in the amount
of $90,000 during the year. The tax rate on this item is 46%
2. At the
beginning of 2012, the corporation purchased a machine for $54,000 (salvage value
of $9,000) that had a useful life of 6 years. The bookkeeper used straight-line
depreciation for 2012, 2013, and 2014 but failed to deduct the salvage value in
computing the depreciation base.
3. Sale of
securities held as a part of its portfolio resulted in a loss of $57,000(pretax).
4. When its
president died, the corporation realized $150,000 from an insurance policy. The
cash surrender value of this policy had been carried on the books as an
investment in the amount of $46,000(the gain is nontaxable).
5. The
corporation disposed of its recreational division at a loss of $115,000 before
taxes. Assume that this transaction meets the criteria for discontinued
operations.
6. The
corporation decided to change its method of inventory pricing from average cost
to the FIFO method. The effect of this change on prior years is to increase
2012 income by $60,000 and decrease 2013 income by $20,000 before taxes. The
FIFO method has been used for 2014. The tax rate on these items is 40%
Instructions
Prepare
an income statement for the year 2014 starting with income from continuing
operations before taxes. Compute earnings per share as it should be shown on
the face of the income statement. Common shares outstanding for the year are120,000
shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.)
TUTORIAL PREVIEW
Prepare an income statement for the year 2014
starting with income from continuing operations before taxes. Compute earnings
per share as it should be shown on the face of the income statement. Common
shares outstanding for the year are120,000 shares. (Assume a tax rate of 30% on
all items, unless indicated otherwise.)
MAHER INC.
Income Statement (Partial)
For the Year Ended December 31, 2014
|
Income
from continuing operations before income tax (a)
|
$838,500
|
|
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Income tax (b)
|
220,350
|
|
|
Income
from continuing operations
|
618,150
|
|
|
Discontinued
operations
|
||
|
Loss from disposal of recreational
division
|
$115,000
|
|
File name: P4-3 Maher Inc.xls File type:xls PRICE: $7
