Preparing an income statement
Tom Brown, controller of Microbiology Labs, informs you that the company has sold a segment of its business. Mr. Brown also provides you with the following information for 2012:
|
Continuing Operations |
Discontinued Segment |
|
|
Sale |
$10,000,000 |
$850,000 |
|
Cost of goods sold |
2,500,000 |
600,000 |
|
Operating expenses |
750,000 |
100,000 |
|
Loss on sale of office equipment |
60,000 |
|
|
Gain on disposal of discontinued segment |
250,000 |
The following information is not reflected in any of the above amounts:
- Microbiology Labs is subject to a 35 percent tax rate.
- During 2012, Microbiology Labs retired outstanding bonds that were to mature in 2014. The company incurred a loss of $80,000, prior to taxes, on the retirement of the bonds.
- Microbiology Labs owns several apple orchards as part of its operations. During 2012, the company”s apple crop was destroyed by an infestation of a rare insect. This unusual and infrequent loss, prior to taxes, totaled $800,000.
- Two million shares of common stock were outstanding throughout 2012.
REQUIRED:
Prepare an income statement for the year ended December 31, 2012, including the recommended earnings-per-share disclosures. In terms of the objectives of financial accounting, comment on the usefulness of each of the different measures of income.