Problem
Maher Inc. reported income from continuing operations before taxes during 2017 of $790,000. Additional Transactions occurring in 2017 but not considered in the $790,000 are as follows:
1. The corporation experienced an uninsured flood loss in the amount of $90,000 during the year 2. At the beginning of 2015, the corporation purchased a machine for $54,000 (salvage value of $9,000) that had a useful life of 6 years. The bookkeeper used straight line depreciation for 2015, 2016, and 2017, but failed to deduct the salvage value in computing the depreciation base. 3. Sale of securities held as a part of its portfolio resulted in a loss of $57,000 (pretax). 4. When it's president died, the corporation realized $150,000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $46,000 (the gain is nontaxable). 5. The coporation disposed of its recreational division at a loss of $115,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. 6. The corporation decided to change its method of inventory pricing from average-cost to the FIFO method. The effect fo this change on prior years is to increase 2015 income by $60,000 and decrease 2016 income by $20,000 before taxes. The FIFO method has been used for 2017. The tax rate on these items is 40%.
- Prepare an income statement for 2017 starting with income form continuing operations before taxes.
- Compute earnings per share as it should be shown on the face of the income statement.
- Common shares outstanding for the year are $120,000 shares.