KEW Corp. has 500,000 shares of common stock outstanding. In 2014, KEW reports income from continuing operations before taxes of $4,350,000. Additional transactions from 2014—and not considered in the $4,350,000—are as follows:
1. The company reviewed its notes receivable and discovered that a note carried at $16,000 was 18 months past due. The note was not likely to be collected.
2. KEW sold machinery for $85,000 that originally cost $300,000. Accumulated depreciation at the time of the sale amounted to $225,000. KEW sells unneeded machinery occasionally when retooling one of its production processes.
3. KEW sold a division during 2014 resulting in a pre-tax loss of $890,000. The operating loss incurred by the discontinued division prior to its sale was $650,000; the loss from its disposal was $240,000. This transaction meets the criteria for discontinued operations.
4. KEW lost $395,000 (pre-tax) when a plant it operated in a third-world country was expropriated following a revolution. There was no prior history of the government expropriating assets of companies operating in that country.

Based on this information, prepare an income statement for the year ended December 31, 2014, starting with income from continuing operations before income taxes; include proper earnings per share disclosures. KEW’s total effective tax rate on all items was 35%.

  • CreatedSeptember 10, 2014
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