and of Net income CASES Judgment Cases The CFo First Things Computing CFTC prepared the following net income statement for the year Inc. ended December First Things Computing Ine. of Net Income 31.2016 the War Ended December Revenues and Gains Gain on Disposal of Plant Assets Total Revenues and Gains Expenses and Losses 65,000 Cost of Goods Sold Selling Expenses and Salaries Office Supplies Expense Office Salaries Expense Loss on Asset Impairment Income Tax Expense Total Expenses and Losses 71.550 Net income from Continuing operations Discontinued operation Income from operations of Discontinued Segment, net of tax of $3.500 12,500 Loss from Disposal of Discontinued Segment, net of tax of $3,000 S 24,250 Net Income Earnings per sharec $4.77 Income from Continuing Operations Income from Discontinued Operations 0.18 $4.96 Eamings per share FTChad 15.000 common shares outstanding for the entire year.It had no preferred stock or dilutive secu- rities. Thus, its earnings per share (EPS) is computed simply as earnings divided by shares outstanding, Accord ing to the current statement of net income, its EPS is S4.95 (S74,250 net income divided by 15,000 shares). Frc records income tax expenseat35% of net income from continuing operations before income taxes. The CFO will make the following adjustments before finalizing the financial statements: 1. FTCwill need to record some amount of bad debtexpense. Theofset will be a reduction in accounts receiv- able. This adjustment is a matter of judgment and reasonable estimates range between $1,000 and $3000. 2. FTC will need to write down its inventory (ie,reduce the reported value of inventory).The offset will be to cost of goods sold. This adjustment is amatter of judgment and reasonable estimates range between $2,500 and $3,750. 3. FTC may need to record an impairment of PPE (ie reduce the reported value of PPE). The offset will be an impairment koss reported on the statement of net income. This adjustment isamatter of judgment and reasonable estimates range between $0 and $5,000, 4. FTC may need to record an impairment of noncurre investments (ie reduce the reported value of nt This investments) The offet will be an impairment loss reported on the statement of net income. adjustment is a matter of judgment and reasonable estimates range between S250 and s750