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Presented below is the stockholders’ equity section of XYZ Company as of its fiscal 2018 year-end,...

Presented below is the stockholders’ equity section of XYZ Company as of its fiscal 2018 year-end, as excerpted from its balance sheet.

XYZ Company Stockholders’ Equity December 31, 2018

Paid-In Capital: Preferred Stock – 8%, cumulative, convertible 1:10, $75 par value: 5,000 shares authorized; 1,000 shares issued and outstanding $ 75,000

Common Stock – $10 par value: 100,000 shares authorized; 40,000 shares issued and outstanding 400,000

Additional Paid-In Capital 525,000

Total Paid-In Capital 1,000,000

Retained Earnings 4,000,000

Total Stockholders’ Equity $5,000,000

XYZ’s corporate tax rate is 40%, and its fiscal 2018 pre-tax income was $500,000, a figure that includes a $100,000 pre-tax loss from the disposal of one of the company’s product divisions that qualifies as discontinued operations. Required—Prepare in good form a partial fiscal 2018 income statement for XYZ Company, beginning with “Income before Income Tax.”

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Answer #1

Answer:

XYZ Company
Income Statement
For the Year Ended December 31, 2018
Particulars Amount ($)
Income before Income tax $ 500,00
Less : Income tax (500,000*40%) $ 200,000
Income from continuing operations $ 300,000
Discontinued operations
Loss from disposal of company's division 100,000*(100-40%), net of $40,000 income tax saving $ (60,000)
Net income $ 240,000
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