Accounting – Income Statement Help

Question

I don’t have a clue where to begin with this question:

Continuing operations:

Net sales $6,350,000

Cost and expenses (including income taxes) 3,125,000

Other data:

Current-year profit generated by segment of the business

discontinued in April (net of income taxes)

350,000

Gain on disposal of discontinued segment (net of income

taxes)

90,000

Prior-period adjustment (decrease in prior years’ income net

of tax benefit)

140,000

Extraordinary loss (net of income tax benefit) 80,000

Cash dividends declared ($1.25 per share) 125,000

Complete the income statement for ABC, Inc. ABC has 100,000 shares of a single class of common stock outstanding throughout the year.

Answer 1

Income from continuing operations (net of tax)...... $3,225,000

Discontinued operations

Profit of discontinued segment $350,000

Gain on disposal of segment $90,000

Profit on discontinued operations (net of tax)...........$440,000

Extraordinary item

Loss from (whatever event) $80,000

Extraordinary loss (net of tax)............................$80,000

Net income (net of tax).........................$3,585,000

Prior-period adjustments are not shown on the income statement but in the statement of retained earnings. The cumulative effect of the change that relates to all years prior to the earliest financial data presented in the retrospectively adjusted information must be calculated and disclosed.

Answer 2

What the question is asking you to do is to differentiate between income from continuing operations, discontinued operations, and extraordinary items - and then put that data into an income statement format.