Frederick Corp. is a public company and has $100,000$ common shares outstanding. In $2017,$ the

company reported income from continuing operations before income tax of $$2,710,000.$

Additional transactions not considered in the $$2,710,000$ are as follows:

$1.$ In $2017,$ Frederick Corp. sold equipment for $$140,000.$ The machine had originally cost

$$80,000$ and had accumulated depreciation to date of $$36,000.$ The gain or loss is considered

ordinary.

$2.$ The company discontinued operations of one of its subsidiaries during the current year at a

loss of $$290,000$ before tax. Assume that this transaction meets the criteria for discontinued

operations. The loss on operation of the discontinued subsidiary was $$90,000$ before tax. The

loss from disposal of the subsidiary was $$200,000$ before tax.

$3.$ The sum of $$520,000$ was received as a result of a lawsuit for a breached $2014$ contract.

Before the decision, legal counsel was uncertain about the outcome of the suit and had not

established a receivable.

$4.$ In $2017,$ the company reviewed its accounts receivable and determined that $$54,000$ of

accounts receivable that had been carried for years appeared unlikely to be collected. No

allowance for doubtful accounts was previously set up$.$

$5.$ An internal audit discovered that amortization of intangible assets was understated by

$$35,000($net of tax$)$ in a prior period. The amount was charged against retained earnings.

Instructions

Analyze the above information and prepare an income statement for the year $2017,$ starting with

income from continuing operations before income tax. Calculate earnings per share as it should

be shown on the face of the income statement. $($Assume a total effective tax rate of $25\%$ on all

items, unless otherwise indicated.$)$

Answer rating: 100% (QA)

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