Income from continuing operations before income tax $1,000,000
Extraordinary property loss from hurricane $140,000*
Loss from discontinued operations $240,000*
Weighted average number of shares outstanding 20,000
Applicable tax rate 40%
*Net of any tax effect.
a. Prepare a partial income statement for Cruz Inc., beginning with income from continuing operations before income tax.
b. Calculate the earnings per common share for Cruz Inc., including per-share amounts for unusual items.
Answer:
a.
CRUZ, INC.
Partial Income Statement
For the Year Ended December 31, 2014
Income from continuing operations before income tax $1,000,000
Income tax expense* 400,000
Income from continuing operations $ 600,000
Loss on discontinued operations 240,000
Income before extraordinary item $ 360,000
Extraordinary item:
Loss due to hurricane 140,000
Net income $ 220,000
* $1,000,000 × 40%
b.
CRUZ, INC.
Partial Income Statement
For the Year Ended December 31, 2014
Earnings per common share:
Income from continuing operations $30.00
1
Loss from discontinued operations 12.002
Income before extraordinary item $18.00
Extraordinary item:
Loss due to hurricane 7.00
3
Net income $11.00
1 $30.00 = $600,000 ÷ 20,000
2 $12.00 = $240,000 ÷ 20,000
3 $7.00 = $140,000 ÷ 20,000