Hello please just fill out the blank of the exercise Bonita Inc. reported income from continuing operations before taxes during 2020 of $790,900. Additional transactions occurring in 2020 but not considered in the $790,900 are as follows. 1. The corporation experienced an uninsured flood loss in the amount of $98,500 during the year. 2. At the beginning of 2018, the corporation purchased a machine for $73,800 (salvage value of $12,300) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2018, 2019, and 2020, 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 $62,300 (pretax). 4. When its president died, the corporation realized $159,800 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $43,910 (the gain is nontaxable). 5. The corporation disposed of its recreational division at a loss of $106,680 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 2018 income by $57,320 and decrease 2019 income by $21,450 before taxes. The FIFO method has been used for 2020. The tax rate on these items is 30%. Prepare an income statement for the year 2020 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 are 128,280 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.) (Round earnings per share to 2 decimal places, e.g. 1.48 and all other answers to 0 decimal places, e.g. 5,275.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Hello please just fill out the blank of the exercise

Bonita Inc. reported income from continuing operations before taxes during 2020 of $790,900. Additional transactions occurring in 2020 but not considered in the $790,900 are as follows.

1.		The corporation experienced an uninsured flood loss in the amount of $98,500 during the year.
2.		At the beginning of 2018, the corporation purchased a machine for $73,800 (salvage value of $12,300) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2018, 2019, and 2020, 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 $62,300 (pretax).
4.		When its president died, the corporation realized $159,800 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $43,910 (the gain is nontaxable).
5.		The corporation disposed of its recreational division at a loss of $106,680 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 2018 income by $57,320 and decrease 2019 income by $21,450 before taxes. The FIFO method has been used for 2020. The tax rate on these items is 30%.

Prepare an income statement for the year 2020 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 are 128,280 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.) (Round earnings per share to 2 decimal places, e.g. 1.48 and all other answers to 0 decimal places, e.g. 5,275.)

Listed Accounts

Discontinued Operations
Dividends
Earnings per share
expenses
Income from continueing operations
income from continuing operations before income tax
income tax
loss from disposal of recreational division
major casualty loss
net income / (loss)
retained earnings, january 1
retained earning, december 31
revenues
total expenses
total revenues

Solution

Assistance Used

Computation of income from cont. operations before taxes:
As previously stated			$790,900
Loss on sale of securities			62,300
Gain on proceeds of life insurance policy ($159,800 – $43,910)			115,890
Flood Loss			98,500
Error in computation of depreciation
As computed ($73,800 ÷ 6)	$12,300
Corrected ($73,800 – $12,300) ÷ 6	(10,250	)	2,050
As restated			$748,040

Computation of income tax:
Income from continuing operations before taxes	$748,040
Nontaxable income (gain on life insurance)	(115,890	)
Taxable income	632,150
Tax rate	× 0.30
Income tax	$189,645

Applicable income tax reduction	=	$106,680 x 30%	=	$32,004
Income from continuing operations	=	($558,395 ÷ 128,280)	=	$4.35
Discontinued operations, net of tax	=	($74,676 ÷ 128,280)	=	$0.58
Net income	=	($483,719 ÷ 128,280)	=	$3.77

Note: No adjustment is needed for the inventory method change, since the new method is reported in 2020 income. The cumulative effect on prior years of retroactive application of the new inventory method will be recorded in retained earnings.

BONITA INC.
Income Statement (Partial)
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Expert Solution

Step 1

Meaning of Continuing Operations:-

Continuing operations means the Income from Operations and any income or expenditure from non operating activities has to be excluded.

Hence , following activities shall be considered as non operating activities

1- Loss on sale of securities , held as portfolio

2 - Gain from Insurance Policy on death of president

3 - Disposal of recreational division

4 - Flood loss.

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