Question 4BE - Intermediate Accounting (Kieso)

Question

Finley Corporation had income from continuing operations of \(10,600,000 in 2017. During 2017, it disposed of its restaurant division at an after-tax loss of \)189,000. Prior to disposal, the division operated at a loss of $315,000 (net of tax) in 2017 (assume that the disposal of the restaurant division meets the criteria for recognition as a discontinued operation). Finley had 10,000,000 shares of common stock outstanding during 2017. Prepare a partial income statement for Finley beginning with income from continuing operations.

Step-by-Step Solution

Answer

The Earning Per share is $1.0096

Meaning of income from continuing operations

Income from continuing operations is an important element to know the performance of regular business activities. It is reported on the company's income statement.

Preparing a partial income statement

Particulars	Amount ($)
Income from continuing operations (A)	$10,600,000
Discontinued Operations
Loss from operation of discontinued restaurant division (net of tax) (B)	$315,000
Loss from disposal of restaurant division (net of tax) (C)	$189,000
Net Income (A-B-C)	$10,096,000
Earnings per share	$1.0096

Working Notes

1. Calculation of Earnings per share

$\begin{array}{rcl}\mathrm{Earning} \mathrm{per} \mathrm{share}& =& \frac{\mathrm{Net} \mathrm{income}}{\mathrm{Outstanding} \mathrm{Common} \mathrm{Shares}}\\ & =& \frac{\$1,009,600}{10,000,000 \mathrm{Shares}}\\ & =& \$1.0096\end{array}$