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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Income Statement, Lower Portion At the beginning of 2019, Cameron Company’s retained earnings was $212,000. For 2019, Cameron has calculated its pretax income from continuing operations to be $120,000. During 2019, the following events also occurred:

  1. 1. During July, Cameron sold Division M (a component of the company). It has determined that the pretax income from the operations of Division M during 2019 totals $39,000 and that a pretax loss of $40,500 was incurred on the sale of Division M.
  2. 2. Cameron had 21,000 shares of common stock outstanding during all of 2019. It declared and paid a $1 per share cash dividend on this stock.

Required:

Assuming that all the pretax items are subject to a 30% income tax rate:

  1. 1. Complete the lower portion of Cameron’s 2019 income statement, beginning with “Pretax Income from Continuing Operations.”
  2. 2. Prepare an accompanying retained earnings statement.

1.

To determine

Prepare the lower portion of the income statement for Company C for the year ended December 31, 2019.

Explanation

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare the lower portion of the income statement for Company C for the year ended December 31, 2019.

Company C
Income statement (Partial)
For the year ended December 31, 2019
ParticularsAmount ($)Amount ($)
Pretax income from continuing operations$120,000 
Income tax expense($36,000) 
Income from continuing operations $84,000
Results from discontinued operations:  
Income from operations of discontinued Division M$27,300 
Loss on sa...

2.

To determine

Prepare the retained earnings statement for the year ended December 31, 2019.

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