The Barrington Construction Company builds office buildings. It also owns and operates achain of motels throughout the Northwest. On September 30, 2018, the company decidedto sell the entire motel business for $40 million. The sale was completed on December 15,2018. Income statement information for 2018 is provided below for the two components ofthe company.($ in millions)ConstructionComponentMotelComponentSales revenue $450.0 $200.0Operating expenses 226.0 210.0Operating income 224.0 (10.0)Other income (loss)* 16.0 (30.0)Income (loss) before income taxes 240.0 (40.0)Income tax expense (benefit)† 96.0 (16.0)Net income (loss) $144.0 $ (24.0)*For the motel component, the entire Other income (loss) amount represents the loss on saleof assets of the component for $40 million when their book value was $70 million.†A 40% tax rate applies to all items of income or loss.In addition, in 2018 the company had pretax net unrealized holding gains on investment securities of $3 million and a positive foreign currency translation adjustment of $1million.Required:1. Prepare a single, continuous 2018 statement of comprehensive income for the BarringtonConstruction Company including EPS disclosures. There were 100 million shares ofcommon stock outstanding throughout 2018. The company had no potentially dilutivesecurities outstanding or stock options that could cause additional common shares. Usethe multiple-step approach for the income statement portion of the statement.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
The Barrington Construction Company builds office buildings. It also owns and operates a
chain of motels throughout the Northwest. On September 30, 2018, the company decided
to sell the entire motel business for $40 million. The sale was completed on December 15,
2018. Income statement information for 2018 is provided below for the two components of
the company.
($ in millions)
Construction
Component
Motel
Component
Sales revenue $450.0 $200.0
Operating expenses 226.0 210.0
Operating income 224.0 (10.0)
Other income (loss)* 16.0 (30.0)
Income (loss) before income taxes 240.0 (40.0)
Income tax expense (benefit)† 96.0 (16.0)
Net income (loss) $144.0 $ (24.0)
*For the motel component, the entire Other income (loss) amount represents the loss on sale
of assets of the component for $40 million when their book value was $70 million.
†A 40% tax rate applies to all items of income or loss.
In addition, in 2018 the company had pretax net unrealized holding gains on investment securities of $3 million and a positive foreign currency translation adjustment of $1
million.
Required:
1. Prepare a single, continuous 2018 statement of comprehensive income for the Barrington
Construction Company including EPS disclosures. There were 100 million shares of
common stock outstanding throughout 2018. The company had no potentially dilutive
securities outstanding or stock options that could cause additional common shares. Use
the multiple-step approach for the income statement portion of the statement.
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