Esquire Comic Book Company had income before tax of $1,000,000 in 2016 before considering the following material items: 1. Esquire sold one of its operating divisions, which qualified as a separate component according to generally accepted accounting principles. The before-tax loss on disposal was $350,000. The division generated beforetax income from operations from the beginning of the year through disposal of $500,000. Neither the loss on disposal nor the operating income is included in the $1,000,000 before-tax income the company generated from its other divisions.
2. The company incurred restructuring costs of $80,000 during the year.
Required: Prepare a 2016 income statement for Esquire beginning with income from continuing operations. Assume an income tax rate of 40%. Ignore EPS disclosures.

                    Esquire Comic Book Company

                               Income Statement

               For the Year Ended December 31, 2016

Operating income                                                $1,000,000

Restructuring costs                                                 ($80,000)

Income from continuing operations b/ Taxes      $920,000

Income tax expense                                              ($368,000)

Income from continuing operations                                        $552,000

Discontinued operations:

Income from discontinued operations                                     $90,000

Net income                                                                               $642,000

Explanation:

Income from discontinued operations must be reported separately, but any restructuring costs must be included as operational expenses.

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