Reference no: EM132462422
Pitchfork, Inc. is preparing its 2020 financial statements. The company's accountant calculated Income from Continuing Operations to be $1,700,000, but upon further review is not certain this number is accurate. Pitchfork has a corporate income tax rate of 30%. Additionally, the company reports only one year of financial data on the face of the financial statements. All amounts listed are pretax unless otherwise noted. After reviewing the following information, determine the appropriate adjustments, if any, to Income from Continuing Operations. Once you have determined the CORRECT Income from Continuing Operations, complete the remainder of the Income Statement for reporting EPS.
Point 1. On January 1, 2017, Pitchfork purchased a machine for $180,000 with a salvage value of $20,000 and useful life of eight years which was depreciated using the straight-line method. During 2020, Pitchfork decided to change to double-declining-balance method. The $1,700,000 Income from Continuing Operations had already been calculated using the straight-line depreciation method.
Question 1: Determine the correct ADJUSTMENT to Income from Continuing Operations (ICO) for Depreciation Expense in 2020.
If you need to increase ICO, enter your answer as a positive number; if you need to decrease ICO, enter your answer as a negative number using ( ) parenthesis. If you determine that Depreciation Expense for 2020 was calculated correctly and therefore does not require an adjustment to ICO, enter NE. Do not use dollar signs or commas when entering your answer.
Point 2. Continuing with the information presented in #1 above, Pitchfork Inc has Income from Continuing Operations (ICO) of $1,700,000 and a corporate tax rate of 30%. Determine if ICO should be adjusted based on the following information:
Point 3. During 2020, Pitchfork closed one of its stores for a pre-tax loss of $150,000. This store closure did not qualify as a component of the entity, nor did it create strategic shift in the operations of the entity. Therefore, it should not be treated as Discontinued Operations. The $150,000 restructuring charges were excluded in determining the $1,700,000 income from continuing operations.
- To correct I.C.O., the Adjustment for Restructuring Charges would be
- To add to ICO, use a positive number; to subtract from ICO, enter a negative number using ( ) parenthesis; if no adjustment is necessary, enter NE.