### Windsor Inc.#### Income Statement (Partial)**For the Year Ended December 31, 2020**1. **Income From Continuing Operations Before Income Tax**: $756,7002. **Income Tax**: $227,010 - **Income From Continuing Operations**: $529,6903. **Discontinued Operations**: - **Loss From Disposal of Recreational Division**: $113,710 - **Less: Applicable Income Tax Reduction**: $79,597 - **Net Loss from Disposal**: $34,1134. **Net Income (Loss)**: $495,577---The income statement above details a partial view of Windsor Inc.'s financial performance for the year ended December 31, 2020. It includes income from continuing operations, taxes, and losses related to discontinued operations along with applicable tax reductions. The earnings per share section is not filled in this document.**Explanation:**- The section under “Income From Continuing Operations Before Income Tax” shows the company's income prior to any taxation.- The “Income Tax” entry represents the tax obligation, reducing the income to arrive at a figure for “Income From Continuing Operations.”- “Discontinued Operations” involves a financial loss from the disposal of a division, which includes a line for applicable tax reductions, leading to a net loss amount.- The final “Net Income (Loss)” reflects the company’s earnings after accounting for both continuing and discontinued operations, including any tax impacts. **Income Statement Analysis: Windsor Inc. 2020**Windsor Inc. reported a pre-tax income from continuing operations of $816,500 for 2020. However, additional transactions were not included in this figure. These transactions are detailed below:1. **Uninsured Loss**: Windsor Inc. suffered an uninsured flood loss amounting to $90,600.2. **Machine Depreciation Error**: - In 2018, the corporation bought a machine for $61,200, with a salvage value of $10,200 and a useful life of six years. - Straight-line depreciation was applied for 2018, 2019, and 2020 without deducting the salvage value from the depreciation base.3. **Securities Sale**: The sale of securities from the company's portfolio resulted in a pretax loss of $59,800.4. **Insurance Proceeds**: - The death of the president led to an insurance realization of $136,400. - The surrender value recorded was $48,930, making the gain non-taxable.5. **Recreational Division Disposal**: The company disposed of its recreational division, incurring a pretax loss of $113,710. This meets the criteria for discontinued operations.6. **Inventory Method Change**: - Windsor Inc. shifted from average-cost to FIFO (First-In, First-Out) for inventory. - The change increased the 2018 income by $63,980 and decreased 2019 income by $21,750. - The new method was applied for 2020, with a tax rate of 30%.**Instructions**: Prepare an income statement for 2020, starting with the pre-tax income from continuing operations. Calculate earnings per share, considering 127,820 common shares. Use a 30% tax rate unless noted. Round earnings per share to two decimal places and all other figures to whole numbers.

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Windsor Inc. reported income from continuing operations before taxes during 2020 of $816,500. Additional transactions occurring in 2020 but not considered in the $816,500 are as follows. 1. 2. 3. 4. 5. 6. The corporation experienced an uninsured flood loss in the amount of $90,600 during the year. At the beginning of 2018, the corporation purchased a machine for $61,200 (salvage value of $10,200) 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. Sale of securities held as a part of its portfolio resulted in a loss of $59,800 (pretax). When its president died, the corporation realized $136,400 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $48,930 (the gain is nontaxable). The corporation disposed of its recreational division at a loss of $113,710 before taxes. Assume that this transaction meets the criteria for discontinued operations. 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 $63,980 and decrease 2019 income by $21,750 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 127,820 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 ore to O decimal plass og 52751

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q