Chapter 4, Problem 4.7E

Income statement presentation; discontinued operations; restructuring costs

• LO4–1, LO4–3, LO4–4

Esquire Comic Book Company had income before tax of $1,000,000 in 2018 before considering the following material items:

1. Esquire sold one of its operating divisions, which qualified as a separate component according to generally accepted accounting principles. The before-tax loss on disposal was $350,000. The division generated before-tax income from operations from the beginning of the year through disposal of $500,000. Neither the loss on disposal nor the operating income is included in the $1,000,000 before-tax income the company generated from its other divisions.

2. The company incurred restructuring costs of $80,000 during the year.

Required:

Prepare a 2018 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 40%. Ignore EPS disclosures.