Prepare a combined statement of income

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Reference no: EM133537956

Question: At the beginning of its Y3 calendar-year accounting period, Aggie, Inc. had retained earnings of $1,500,000. During Y3, Aggie reported income from continuing operations before taxes of $600,000. The following additional transactions occurred in Y3 but were not included in the $600,000. Assume all of the following were material.

At the beginning of Y1, the company purchased a machine for $12,000 that they estimated to have a useful life of 10 years with $2,000 salvage value. Straight-line depreciation was used but the bookkeeper neglected to take the salvage value into consideration during Y1, Y2, and Y3.

2. Aggie had a gain on sale of a plant asset of $5,000 (pre-tax).

3. Aggie had an uninsured flood loss of $50,000 (pre-tax).

4. Aggie declared cash dividends of $200,000 on its common stock. $150,000 of the dividends had been paid at year-end.

5. On April 30, Y3 ABC decided to dispose of a component. On September 30, the component was sold for $1 million when its book value was $700,000. From January 1, Y3 until the time of sale, the component had a pre-tax loss of $100,000.

6. ABC had unrealized pretax foreign currency translation losses of $20,000 during Y3.

We are asked to Prepare a combined statement of income and other comprehensive income for Y3, beginning with income from continuing operations before taxes and including the appropriate EPS information. Assume common stock outstanding was 10,000 shares throughout the year and that the tax rate was 40%.

We are asked to Prepare a statement of retained earnings for Aggie for the year ending December 31, Y3.

Reference no: EM133537956

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