115000 before taxes assume that this transaction

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$115,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. method. The effect of this change on prior years is to increase 2010 income by $60,000 and decrease 2011 income by $20,000 before taxes. The FIFO method has been used for 2012. The tax rate on these items is 40% Instructions: Common shares outstanding for the year are 120,000 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.) MAHER INC. Income Statement (Partial) For the Year Ended December 31, 2012 $838,500 220,350 Income from continuing operations 618,150 Discontinued operations Loss from disposal of recreational division $115,000 Less: Applicable income tax reduction 34,500 80,500 Income before extraordinary item 537,650 Extraordinary item: Major casualty loss 90,000 Less: Applicable income tax reduction 41,400 48,600 Net income $489,050 Per share of common stock: Income from continuing operations ($618,150 / 120,000 shares) (Rounded) $5.15 Discontinued operations, net of tax ($80,500 / 120,000 shares) (Rounded) (0.67) Income before extraordinary items 4.48 Extraordinary item, net of tax ($48,600 / 120,000 shares) (0.41) Intermediate Accounting , 14 th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse P4-3 (Irregular Items) Maher Inc. reported income from continuing operations before taxes during 2012 of $790,000. 1. The corporation experienced an uninsured flood loss (extraordinary) in the amount of 2. At the beginning of 2010, the corporation purchased a machine for straight-line depreciation for 2010, 2011, and 2012 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 4. When its president died, the corporation realized 5. The corporation disposed of its recreational division at a loss of 6. The corporation decided to change its method of inventory pricing from average cost to the FIFO Prepare an income statement for the year 2012 starting with income from continuing operations before taxes. Compute earnings per share as it should be shown on the face of the income statement. Income from continuing operations before income tax (a) Income tax (b)
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987b4adf2e74f9aa851952442c0257ad6d48389e.xlsx, Problem 4-3 Solution, Page 14 of 16, 03/03/2016, 09:54:19 Name: Solution Date: Instructor: Course: Net income ($489,050 ÷ 120,000 shares) $4.08 As previously stated $790,000 Loss on sale of securities (57,000) Gain on proceeds of life insurance policy ($150,000 – $46,000) 104,000 Error in computation of depreciation As computed ($54,000 ÷ 6) 9,000 Corrected (($54,000 – $9,000) ÷ 6) 7,500 1,500 As restated $838,500 Income from continuing operations before taxes $838,500 Nontaxable income (gain on life insurance) (104,000) Taxable income 734,500 Tax rate 30% Income tax expense $220,350 (a) Computation of income from continued operations before taxes: (b) Computation of income tax: Note: No adjustment is needed for the inventory method change, since the new method is reported in 2012 income. The cumulative effect on prior years of retroactive application of the new inventory method will be recorded in retained earnings.
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987b4adf2e74f9aa851952442c0257ad6d48389e.xlsx, Problem 4-3, Page 15 of 16, 03/03/2016, 09:54:19 Name: Date: Instructor: Course: $790,000 Additional transactions occurring in 2012 but not considered in the $790,000 are as follows.
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