Notes to the financial statements reveal the following information: 1. Gain on sale of a portion of the branded product line. In Year 10, Henry completed the sale of a portion of one of its branded product lines for $735 million. The transaction resulted in a pretax gain of $464.5 million. The sale did not qualify as a discontinued operation. Henry did not disclose the tax effect of the gain reported in Table above. REQUIRED a. Discuss whether you would adjust for each of the following items when using earnings to forecast the future profitability of Henry : 1. Gain on sale of a portion of the branded product line. 2. Extraordinary loss . b. Indicate the adjustment you would make to Henry’s net income for each item in Requirement (a)
Notes to the financial statements reveal the following information: 1. Gain on sale of a portion of the branded product line. In Year 10, Henry completed the sale of a portion of one of its branded product lines for $735 million. The transaction resulted in a pretax gain of $464.5 million. The sale did not qualify as a discontinued operation. Henry did not disclose the tax effect of the gain reported in Table above. REQUIRED a. Discuss whether you would adjust for each of the following items when using earnings to forecast the future profitability of Henry : 1. Gain on sale of a portion of the branded product line. 2. Extraordinary loss . b. Indicate the adjustment you would make to Henry’s net income for each item in Requirement (a)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Notes to the financial statements reveal the following information: 1. Gain on sale of a portion of
the branded product line. In Year 10, Henry completed the sale of a portion of one of its
branded product lines for $735 million. The transaction resulted in a pretax gain of $464.5
million. The sale did not qualify as a discontinued operation. Henry did not disclose the tax
effect of the gain reported in Table above.
REQUIRED
a. Discuss whether you would adjust for each of the following items when using earnings to
forecast the future profitability of Henry :
1. Gain on sale of a portion of the branded product line.
2. Extraordinary loss .
b. Indicate the adjustment you would make to Henry’s net income for each item in Requirement
(a)
Transcribed Image Text:Henry Company
Income Statement
(amounts in millions)
(Problem 6.18)
Year 12
Year 11
Year 10
Sales
$ 9,431
$ 8,821
$ 8,939
Gain on sale of branded product line
Cost of goods sold
Selling and administrative expenses
465
-
(6,094)
(5,884)
(1,955)
(5,789)
(1,746)
(1,882)
Interest income
27
23
25
Interest expense
Other income (expense)
(270)
(25)
(294)
(333)
(45)
Income before Income Taxes and Cumulative
$ 1,279
(445)
$ 834
$ 1,463
Effect of Accounting Changes
Income tax expense
$ 673
(178)
$ 495
(573)
$ 890
Income before Extraordinary Item
Extraordinary loss (net of taxes)
(17)
Net Income
$ 834
$ 478
$ 890
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