Income Statement
INCOME STATEMENT – 45 POINTS
Torino Inc. reported income from continuing operations before taxes during 2012 of $801540. Additional transactions occurring in 2012 but not considered in the $801540 are as follows.
1. The corporation experienced an uninsured flood loss (extraordinary) in the amount of $90600 during the year. The tax rate on this item is 46%.
2. At the beginning of 2010, the corporation purchased a machine for $56000 (salvage value of $8980) that had a useful life of 6 years. The bookkeeper used 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 $56850 (pretax).
4. When its president died, the corporation realized $155000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $46120 (the gain is nontaxable).
5. The corporation disposed of its recreational division at a loss of $115500 before taxes. Assume that this transaction meets the criteria for discontinued operations.
6. 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 2010 income by $61200 and decrease 2011 income by $21320 before taxes. The FIFO method has been used for 2012. The tax rate on these items is 40%.
Instructions
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. Common shares outstanding for the year are 119500 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.)
TORINO INC.
Income Statement (Partial)
For the Year Ended December 31, 2012
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Computation of income from cont. operations before taxes:
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Computation of income tax:
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