Chapter 4, Problem 4.4P

Restructuring costs; Discontinued operations; Accounting error

• LO4–3, LO4–4, LO4–5

The preliminary 2018 income statement of Alexian Systems, Inc., is presented below:

ALEXIAN SYSTEMS, INC. Income Statement For the Year Ended December 31, 2018 ($ in millions, except earnings per share)
Revenues and gains:
Net sales	$425
Interest	3
Other income	126
Total revenues and gains	554
Expenses:
Cost of goods sold	270
Selling and administrative	154
Income taxes	52
Total expenses	476
Net Income	$ 78
Earnings per share	$3.90
Revenues and gains:
Net sales	$425
Interest	3
Other income	126
Total revenues and gains	554
Expenses:
Cost of goods sold	270
Selling and administrative	154
Income taxes	52
Total expenses	476
Net Income	$ 78
Earnings per share	$3.90

Additional Information:

1. Selling and administrative expenses include $26 million in restructuring costs.

2. Included in other income is $120 million in income from a discontinued operation. This consists of $90 million in operating income and a $30 million gain on disposal. The remaining $6 million is from the gain on sale of investments.

3. Cost of goods sold was increased by $5 million to correct an error in the calculation of 2017’s ending inventory. The amount is material.

Required:

For each of the three additional facts listed in the additional information, discuss the appropriate presentation of the item described. Do not prepare a revised statement.