(Irregular Items)Maher Inc. reported income from continuing
operations before taxes during 2010 of $790,000. Additional transactions
occurring in 2010 but not considered in the $790,000 are as follows.
- The corporation experienced an uninsured flood loss (extraordinary)
in the amount of $90,000 during the year. The tax rate on this item is
- At the beginning of 2008, the corporation purchased a machine for
$54,000 (salvage value of $9,000) that had a useful life of 6 years. The
bookkeeper used straight-line depreciation for 2008, 2009, and 2010 but
failed to deduct the salvage value in computing the depreciation base.
- Sale of securities held as a part of its portfolio resulted in a loss of $57,000 (pretax).
- When its president died, the corporation realized $150,000 from an
insurance policy. The cash surrender value of this policy had been
carried on the books as an investment in the amount of $46,000 (the gain
- The corporation disposed of its recreational division at a loss of
$115,000 before taxes. Assume that this transaction meets the criteria
for discontinued operations.
- The corporation decided to change its method of inventory pricing
from average cost to the FIFO method. The effect of this change on prior
years is to increase 2008 income by $60,000 and decrease 2009 income by
$20,000 before taxes. The FIFO method has been used for 2010. The tax
rate on these items is 40%.
Prepare an income statement for the year 2010 starting with income
from continuing operations before taxes. Compute earnings per share as
it should be shown on the face of the income statement. Common shares
outstanding for the year are 120,000 shares. (Assume a tax rate of 30%
on all items, unless indicated otherwise.)