Problem:
The Red Inc. has income from continuing operations before tax of $1,575,000 in 2021. Additional pre-tax transactions not included in the computation of the $1,575,000 are as follows: 1. In 2021, Red decided to sell one of its manufacturing divisions, which qualifies as a discontinued operation for financial reporting purposes. On Nov. 1, 2021, the division assets were sold for $3,250,000. On the date of the sale, the division assets had a book value of $3,750,000. The discontinued division had a loss from operations from Jan. 1, 2021 through Nov. 1, 2021 of $200,000. 2. The sale of operational equipment resulted in a loss of $57,000 3. Red acquired 70% of the outstanding stock of Green Co. and as such, consolidates Green Co.'s financial results with its own. Green Co. had net income of $300,000 in 2021.
REQUIRED: Use all of the information above to prepare a 2021 income statement for the Red Inc. beginning with income from continuing operations before tax. Assume an income tax rate of 40%. Provide full disclosure on the Income Statement, but ignore EPS disclosures.