Exercice 3.

9 - An
9 - Anthonia Thom
Thomas
Operation Type
1 Discontinuous
2 Continuous
3 Continuous
Continuous for the investment and
4 discontinuous for 55000
5 Discontinuous
6 Continuous
Type of irregular item
water damage
investment
sell of shares with a loss
refund of insurance
loss with the ice-hockey
changing of stocks method
Income from continuous operations before taxes :
As stated in the book
Loss on sale of securities
Gain on proceeds of life insurance policy
Error in computation of depreciation :
As computed 4,500
Corrected 3,750
As restated

Computation of income tax :

Income from continuing operations before taxes
Nontaxable income
Taxable income
Tax rate
Income tax expense

Income from continuing operations

before income tax
Income tax
Income from continuing operations
Discontinued operations
Loss from disposal of ice hockey club division 57500
Less : Applicable income tax reduction 17250
Income before extraordinary item
Extraordinary item :
Major casualty loss 40000
Less : Applicable income tax reduction 46% 18400
Net income
80 000 shares
Per share of common stock :
Income from continuing operations
Discontinued operations, net of tax
Income before extraordinary items
Extraordinary item, net of tax
Net income

Is adjustment needed for the inventory method change ?

 No adjustment is needed for the inventory method change, due to the fact that the new method is
reported in 2014 income.

Where

The change will be recorded in retained earnings.

 395,000
- 28,500
32,000

750
399,250

399,250
- 32,000
368,000
30%
110,400

399,250
110,400
288,850

40250
248,600

21600
227,000

4
0.503125
3
0.27
2.84
, due to the fact that the new method is
me.

ained earnings.
Shares of common stock 20000.00
Shares of preferred stock 5000.00
25000.00

Net income 227000.00

Cash dividends for preferred stockholders 7400.00
219600.00

EPS 8.78