Question

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.

Required:
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%.



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  • CreatedSeptember 10, 2014
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