Question

eBook Calculator Comprehensive: Comparative Income Statements Tiger Company's accountant for the prepared comparative Income statements for 2016 and 2017 as follows: Comparative Income Statements For Years Ended December 31 2017 2016 Sales Cost of goods sold Gross profit Operating expenses Operating income Other items $ 3,500,000 (1,600,000) $ 1,900,000 (1,300,000) $600,000 (200,000) $400,000 (120,000) $280,000 $4,600,000 (2,600,000) $2,000,000 (1,500,000) $500,000 100,000 $600,000 (180,000) $420,000 Income before income taxes Income tax expense (30%) Net Income The auditor of Tiger Company reviewed the accounting records and income statements and discovered the facts described in items 1 and 2 below. Al amounts incurred during 2016 and 2017 are included in the preceding statements. 1. Included in the category "Other Items" (along with other smaller miscellaneous items) were the following: a. A loss of $60,000 in 2016 that was considered to be both unusual and infrequent b. A $150,000 loss in 2017 from an unusually large write-down of inventory because of obsolescence C. A $250,000 gain in 2016 that was considered to be both unusual and infrequent 2. On July 1, 2017, Tiger has announced its intention to sell its backscratcher division. This division is considered a component of the company. Operating results for this division are included in the company's overall operating results for 2016 and 2017, as shown previously, and are as follows: 2017 2017 Check My Work Previous Next >

Answer 1

	2017	2016
Sales	2900000	3900000
Cost of goods sold	(980000)	(2310000)
Gross Profit	1920000	1590000
Operating expenses	(1020000)	(1390000)
Operating income	900000	200000
Other items:
Loss from obsolete inventory	(150000)
Unusual loss		(60000)
Unusual gain		250000
Miscellaneous	(50000)	(90000)
Pretax income from continuing operations	700000	300000
Less: Income tax expense	(210000)	(90000)
Result from discontinued operations	(210000)	(210000)
Income (Loss) from operations of discontinued division	(112000)
Loss on write down of held for sale backscratcher	168000	420000

Workings:

Sales for 2017 = 3,500,000 - 600,000 = 2,900,000

Sales for 2016 = 4,600,000 - 700,000 = 3,900,000

Cost of goods sold for 2017 = 1,600,000 - 620,000 = 980,000

Cost of goods sold for 2016 = 2,600,000 - 290,000 = 2,310,000

Miscellaneous 2016 = 250,000 - 60,000 - 100,000 = 90,000

Fair value of Backstrachers = 620,000 - 510,000 = 110,000

Book value = 720,000 - 450,000 = 270,000

Net book value = 110,000 - 270,000 = 160,000

Loss post income tax = 160,000 * ( 100% -30%) = 112,000