Sparky Company is preparing its 2016 fnancial statements. Income From ConTnuing OperaTons (ICO)
Sparky Company is preparing its 2016 fnancial statements. Income From ConTnuing OperaTons (ICO) For 2016 was determined to be $1,000,000, but upon Further review, Sparky’s bookkeeper is not certain this number is accurate.During 2016, Sparky declared preFerred dividends oF $70,000, paid $90,000 For dividends, and received $135,000 For dividends on available- For-sale equity securiTes. ±he bookkeeper did not include any oF these when calculaTng ICO.Determine the ADJUS±MEN± to Sparky’s Income From ConTnuing OperaTons (ICO) For this item. Sparky has a corporate tax rate oF 30%.IF you need to increase ICO, enter your answer as a posiTve number; For instance: 3000IF you need to decrease ICO, enter your answer as a negaTve number; For instance: -3000IF you determine no change is needed to ICO; enter 0Calculaton ofEarnings applicable To common sTockholders:DetailsAmountIncome From conTnuous operaTons(beFore adjustment)$ 1,000,000Add: Other income dividends Fromavailable For sale securiTes$ 135,000Income From conTnuous operaTonsbeFore tax$ 1,135,000Less: ±axes @30%$ (340,500)Income From conTnuous operaTons$ 794,500±he decrease in conTnuous operaTons is -$205,500 (i.e., $1,000,000-$794,500).2.Over the past 4 years, SPARKY has esTmated bad debts based on 3.5% oF credit sales. OnMay 1, 2016, a²er reviewing their major client’s credit worthiness, they decided to changethis esTmate to 4.75%. IF Sparky had used the 4.75% in the past, bad debt expenses wouldbe $150,000 higher in prior years. During fscal 2016, Sparky had earned sales revenues oF$2,750,000 oF which 20% were cash sales and 80% were credit sales.±he bookkeepercalculated bad debt expenses For 2016 using the 3.5%.Determine the ADJUS±MEN± to Sparky’s Income From ConTnuing OperaTons (ICO) For thisitem.Sparky has a corporate tax rate oF 30%.IF you need to increase as a negaTve number; For instance: -3000IF you determine no change is needed to ICO; enter 0ICO, enter your answer as a posiTve number; For instance: 3000
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