Colonel Electric Company is one of the largest and most diversified industrial corporations in the world. From the time of its incorporation in 1892, the company has engaged in developing, manufacturing, and marketing a wide variety of products for the generation, transmission, distribution, control, and utilization of electricity.
Appearing in the following table are the 2006-2008 income statements of Colonel Electric Company.

In 2008 the company earned Royalties and fees revenue of $1 billion from a one-time, six-month contract with the U.S. government. The company does not expect to do any further business with the U.S. government in the future.
Required:
1. Calculate Colonel Electric’s sustainable earnings for each year. (Although there is no consensus on how best to measure sustainable earnings, one common approach is to start with GAAP reported earnings and then eliminate unsustainable earnings items.)
2. How do Colonel Electric’s sustainable earnings compare to its reported net earnings in each year?

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Comparative Income Statement for Years Ended December 31 ($ in millions) Revenues Sales of goods 2008 2007 2006 $54,196 Sales of services Royalties and fees Total revenues Costs and expenses 11,923 $53,177 10,836 $52,767 8,863 1,629 753 783 67,748 64,766 62,413 Cost of goods sold (24,594) (24,308) (22,775) Cost of services sold (8,425) (6,785) (6,274) Restructuring (charges) reversals 1,000 (2,500) Interest charges (595) (649) (410) Other costs and expenses (6,274) (5,743) (5,211) Litigation charges (income) 550 (250) (Losses) gains on sales of investments (75) 25 (Losses) gains on asset sales 25 55 (35) Inventory write-offs (18) Asset impairment write-offs Special item charges (34) | | (24) (8) Loss from labor strike (20) Total costs and expenses (38,422) (37,468) (37,462) Earnings from continuing operations before income taxes 29,326 27,298 24,951 Provision for income taxes (34%) (9,971) (9,281) (8,483) Earnings from continuing operations $19,355 $18,017 $16,468 Income (loss) from discontinued operations (net of tax) (250) 1,100 Gain (loss) on sale of discontinued operations (net of tax) 750 - Extraordinary gain (loss) on early debt retirement (net of tax) (50) 10 Net earnings $20,055 $17,767 $17,578