Vanpop Inc. reported income from continuing operations before taxes during 2014 of $463,000. Additional transactions occurring in 2014 but not considered in the $463,000 are as follows.

1. The corporation experienced an uninsured hurricane loss (extraordinary) in the amount of $130,000 during the year. The tax rate on this item is 40%.

2. At the beginning of 2012, the corporation purchased equipment for $62,000 (salvage value of $6,000) that had a useful life of 7 years. The bookkeeper used straight-line depreciation for 2012, 2013, and 2014 but incorrectly used a 10 year useful life in determining the deprecation amount.

3. Sale of securities held as a part of its portfolio resulted in a gain of $40,000 (pretax).

4. When its chairman of the board died, the corporation realized $500,000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $410,000 (the gain is nontaxable).

5. The corporation disposed of its consumer division at a loss of $210,000 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 2012 income by $86,000 and increase 2013 income by $43,000 before taxes. The FIFO method has been used for 2014. The tax rate on these items is 40%.3. Sale of securities held as a part of its portfolio resulted in a gain of $40,000 (pretax).

instruction 1

Prepare an income statement for the year 2014 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 200,000 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.

Answer rating: 100% (QA)

income from continuing operation before tax 465400 income tax 111900 income from continuing op... View the full answer