You have been hired by the CFO of Turner Corporation, a public company. As the new senior accountant, you have been asked to help with the preparation of the 2020 income statement.

For 2020, Turner reported pre-tax income from continuing operations of $2,150,000. However, you have been advised that the following transactions have not yet been considered.

1. A review of the company's depreciation policies for its computer equipment revealed that depreciation expense relating to 2020 was understated by $29,000.

2. During the year, the company incurred an uninsured loss from flood damage of $270,000.

3. In 2020, the company sold old equipment with net book value of $180,000 for $160,000.

4. During the year, Turner disposed of one its subsidiaries. The CFO tells you that the transaction meets the criteria for discontinued operations. The after-tax loss on the subsidiary’s operations was $240,000 and the after- tax gain on disposal of the subsidiary was $190,000.

5. The company made a payment of $300,000 to settle a lawsuit. The lawsuit related to a 2015 event that the company lawyers had been working on since that time. Based on the lawyers’ advice, no contingent liability had been set up.

6. At December 31, 2020, Turner had an unrealized loss on FV-OCI equity investments (gains/losses not recycled) of $150,000 net of tax.

Instructions

In good form, prepare a partial 2020 income statement for Turner, considering the effects (if any) of the above items. The statement should start with income from continuing operations before income taxes. List all necessary adjustments to income from continuing operations to arrive to income from continuing operations before tax, as revised. Unless otherwise indicated, the amounts in the above items are before tax. You may assume an income tax rate of 40% for all items. Earnings per share calculations are not required.

Turner Corp. Statement of Financial Performance (Partial) For the Year Ended December 31, 2020
Income from continuing operations before tax, as previously stated	$2,150,000
Income from continuing operations before tax, as revised
Income tax expense
Income before discontinued operations
Discontinued operations
Net Income
Other Comprehensive Income
Comprehensive income

Answer rating: 100% (QA)

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