(Income Statement, irregular Items)

4 Chapter 4 Income Statement and Related Information P4.7B (LO 3,4,5,) (Income Statement, Irregular Items) Rafter Corp. has 400,000 shares of common stock outstanding. In 2020, the company reports income from continuing operations before income tax of $2,680,000. Additional transactions not con- sidered in the $2,680,000 are as follows: 1. In 2020, Rafter Corp. sold available for sale investments for $86,000. The investments had originally cost $80,000. 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 $450,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss from operations of the discontinued subsidiary was $390,000 before taxes; the loss from disposal of the subsidiary was $60,000 before taxes. 3. An internal audit discovered that depreciation of equipment was overstated by $40,000 (net of tax) in a prior period. The amount was charged against retained earnings. 4. The company had a loss of $60,000 on the condemnation of much of its property. Instructions Analyze the above information and prepare an income statement for the year 2020, starting with income from continuing opera- tions before income tax. Compute earnings per share as it should be shown on the face of the income statement. (Assume a total effective tax rate of 19% on all items, unless otherwise indicated.)