Good Machinery Inc. reported the following 2012 income statement (in millions):

Good Machinery Inc. Income statement for the year ended June 30, 2012
Sales	$135,540
Cost of goods sold	57,667
Gross profit	77,873
Selling, general and administrative	31,910
Research and development expenses	9,278
Restructuring charge	4,443
Litigation settlement	15,000
Pension curtailment gain	(410)
Other expenses, net	6,657
Total expenses	66,878
Operating profit	10,995
Interest expense	5,589
Gain on sale of long-term investments	(5,449)
Income before taxes	10,855
Provision for income tax	4,626
Effect of change in accounting principle	6,320
Net loss	$ (91)

Footnotes to Good Machinerys MD&A and financial statements disclose the following information:

1) Restructuring charges include accruals for severance packages and losses on asset write-downs. The company does not anticipate further restructuring activity.

2) A lawsuit related to product malfunctions was settled and ongoing lawsuits will not materially affect future income.

3) Changes to the companys pension plan resulted in a one-time gain.

4) Securities were sold during the year to fund the litigation settlement.

5) Tax-law changes resulted in nondeductibility of certain expenses. The company anticipates a 35% tax rate for 2013 onward.

Required:

What adjustments would you make to Good Machinerys income statement before you started to forecast earnings for 2013? Prepare an adjusted income statement.

Answer:

The following income statement reflects some adjustments that could be made before forecasting 2013 earnings.

Provide your answers in millions. (Round to the nearest whole number, if applicable. DO not enter any answers as negative numbers.)

Sales	Answer
Cost of goods sold	Answer
Gross profit	Answer
Selling, general and administrative	Answer
R&D expenses	Answer
Restructuring charge	Answer
Pension curtailment gain	Answer
Litigation settlement	Answer
Other expenses, net	Answer
Total expenses	Answer
Operating profit	Answer
Other expense (income)
Interest expense	Answer
Gain on sale of securities	Answer
Income before taxes	Answer
Provision for income tax (35%)	Answer
Effect of change in accounting principle	Answer
Net income	Answer