Colonel Electric Company is one of the largest and most diversified industrial corporations in the world. From the time of its incorporation in 1892, the company has engaged in developing, manufacturing, and marketing a wide variety of products for the generation, transmission, distribution, control, and utilization of electricity.

Appearing in the following table are the 2011€“2013 income statements of Colonel Electric Company.


In 2013, the company earned Royalties and fees revenue of $1 billion from a one-time, six-month contract with the U.S. government. The company does not expect to do any further business with the U.S. government in the future.
Required:
1. Calculate Colonel Electric€™s sustainable earnings for each year. (Although there is no consensus on how best to measure sustainable earnings, one common approach is to start with GAAP reported earnings and then eliminate unsustainable earnings items.)
2. How do Colonel Electric€™s sustainable earnings compare to its reported net earnings in eachyear?

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Comparative Income Statement for Years Ended December 31, in millons) 2013 2012 2011 Revenues $54,196 11,923 1,629 67,748 Sales of goods Sales of services $52,767 8,863 $53.177 10,836 753 64,766 783 62,413 Royalties and fees Total revenues Costs and expenses (24,594) (8,425) 1,000 (595) (6,274) 550 Cost of goods sold Cost of services sold Restructuring (charges) reversals Interest charges Other costs and expenses Litigation charges (income) Losses) gains on sales of investments Losses) gains on asset sales Inventory write-offs Asset impairment write-offs Special item charges Loss from labor strike (24,308) (6.785) (22,775) (6,274) (2,500) (410) (5,211) (250) 25 (35) (649) (5,743) (75) 25 (18) (24) (34) (38,422) 29,326 Total costs and expenses (37,468) (37,462) Earnings from continuing operations before income taxes 27,298 (9,281) 18.017 24,951 Provision for income taxes (34%) Earnings from continuing operations Income (loss) from discontinued (8,483) 16,468 19,355 operations (net of tax) operations (net of tax) retirement (net of tax) (250) 1,100 Gain (loss) on sale of discontinued 750 Extraordinary gain (loss) on early debt 50) $20,055 i0 Net earnings $17.767 $17578