1: Special Item Accounting (20 marks) Cambridge Corp. is a construction machinery manufacturer. The following is the consolidated income statement of Cambridge Corp. and subsidiaries. Cambridge Corporation and Subsidiaries Consolidated income statement (S million) 2016 2017 2018 2019 2020 Revenue 1,000 1,000 1,000 1,000 1,000 Cost of goods sold (550) (520) (500) (480) (450) Gross profit 450 480 500 520 550 Expenses Selling and administration expenses (150) (180) (200) (120) (150) Restructuring charge (400) PPE impairment charge (300) Interest expenses (100) (100) (100) (100) (100) income before tax 200 200 (500) 300 300 income tax expense (70) (70) 175 (105) (105) Income before continuing operations 130 130 (325) 195 195 Gain from extinguishment of debt 500 65 65 Loss from operating discontinued (10) segment Gain from sale of discontinued segment Net income 30 130 150 175 195 260 Notes from the annual report provided the following additional information: (1) The PPE impairment charge in 2018 came from the fact that a construction equipment was estimated to have useful life of 6 years with no salvage value, but actually became useless at the end of year 3. (2) The objective of restructuring is to reduce future labor costs and improved efficiency, and it was expected that this restructuring would benefit future TWO (2) years. (3) The marginal tax rate is 35%