Reference no: EM132880366
Problem - Income Statement Deficiencies - David Company's income statements are presented here:
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Year Ended December 31,
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2020
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2019
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Net sales
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$900,000
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$750,000
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Costs and expenses:
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Cost of goods sold
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$720,000
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$600,000
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Selling, general, and administrative expenses
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112,000
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90,000
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Other, net
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11,000
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9,000
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Total costs and expenses
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$843,000
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$699,000
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Income from continuing operations before income taxes
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$ 57,000
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$ 51,000
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Income taxes
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23,000
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21,000
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Income from continuing operations
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$ 34,000
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$ 30,000
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Loss on sale of Drexler Division, less applicable income taxes of $8,000
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8,000
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-
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Net income
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$ 26,000
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$ 30,000
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Earnings per share of common stock:
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Net income
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$ 2.60
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$ 3.00
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Additional facts are as follows:
a. The loss from operations of the discontinued Drexler Division (a strategic component of the company) from January 1, 2020 to September 30, 2020 (the portion of the year prior to the date of sale), and from January 1, 2019 to December 31, 2019, is included in David's income statements for the year ended December 31, 2020 and December 31, 2019, respectively, in "other, net."
b. David has a simple capital structure with only common stock outstanding, and the net income per share of common stock was based on the weighted average number of common shares outstanding during each year.
c. David's common stock is listed on the New York Stock Exchange and closed at $13 per share on December 31, 2020, and $15 per share on December 31, 2019.
Required - Determine from the additional facts listed whether the presentation of those facts in David's income statements is appropriate. If the presentation is appropriate, discuss the rationale for the presentation. If the presentation is not appropriate, specify the appropriate presentation and discuss its rationale. Do not discuss disclosure requirements for the notes to the financial statements.