Disclosing net of tax, and the earnings-per-share calculation
Woodland Farm Corporation has the following items to include in its financial statements:
|
Debit |
Credit |
|
Extraordinary loss from flood |
250,000 |
|
Extraordinary gain from bond retirement |
55,000 |
|
Sale of inventory |
250,000 |
|
Loss on disposal of business segment |
100,000 |
|
Loss effect due to change in accounting method |
80,000 |
|
Advertising expense |
50,000 |
|
Income earned by disposal business segment |
150,000 |
None of the listed amounts includes any income tax effects. The company”s tax rate is 35 percent.
REQUIRED:
a. Describe how each item above would be disclosed on the income statement or statement of retained earnings.
b. Compute the tax effect of each of the items that should be disclosed net of tax. What dollar amount would be shown on the financial statements for each of these items?
c. Assume that income from continuing operations (after tax) was $600,000, and 200,000 shares of common stock were outstanding during the year. Provide the earnings-per-share calculation.