Esquire Comic Book Company had income before tax of $1,750,000 in 2021 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 $415,000.
2. The division generated before-tax income from operations from the beginning of the year through disposal of $650,000. The company incurred restructuring costs of $80,000 during the year.

Required:
Prepare a 2021 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 25%.

Net income = $1,548,750

Explanation:

The 2021 income statement for Esquire can be prepared as follows:

Esquire Comic Book Company

Income Statement

For the Year Ended 20201

Details                                                                         $                          $            

Income from continuing operations

Operating income                                                 1,750,000

Restructuring costs                                                 (80,000)  

Income from continuing operations                                              1,830,000

Income (loss) from discontinued operation

Loss on disposal of discontinued operation         (415,000)

Income from discontinued operation                    650,000  

Net income (loss) from discontinued operation                              235,000  

Income before tax                                                                          2,065,000

Income tax expense (25% * 2,065,000)                                        (516,250)  

Net income                                                                                      1,548,750

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