Question

Problem 17-6AA Income statement computations

Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow.

		Debit		Credit
a.	Interest revenue			$	14,300
b.	Depreciation expense—Equipment	$	34,300
c.	Loss on sale of equipment		26,150
d.	Accounts payable				44,300
e.	Other operating expenses		106,700
f.	Accumulated depreciation—Equipment				71,900
g.	Gain from settlement of lawsuit				44,300
h.	Accumulated depreciation—Buildings				175,100
i.	Loss from operating a discontinued segment (pretax)		18,550
j.	Gain on insurance recovery of tornado damage				29,420
k.	Net sales				1,001,500
l.	Depreciation expense—Buildings		52,300
m.	Correction of overstatement of prior year’s sales (pretax)		16,300
n.	Gain on sale of discontinued segment’s assets (pretax)				35,500
o.	Loss from settlement of lawsuit		24,050
p.	Income tax expense		?
q.	Cost of goods sold		485,500

Assume that the company’s income tax rate is 30% for all items. Compute the tax effects and after-tax amounts of the three items labeled pretax.

2a. What is the amount of income from continuing operations before income taxes?
2b. What is the amount of the income tax expense?
2c. What is the amount of income from continuing operations?

Answer 1

Aroct NO Given that , Income taz vrate fa all items 30 %. Ef fect of fncoms taxes (debik o kaes in parenthescs) Pretar Perliculaı Зо% бая Afben bex ebbed diecontiued (319550) (6565) (2985 Kons hom operalinge Segmet (44890) ( 11410) Corefion f ovenafdement gʻ pior yr sales ($16 300) Goin on sale f disron hinwed beg trent ame$ 36,500 $34850 $10650 kons fom opeuating abber tax amount. discontinuedd egmert | 8550 - (18550 X 30 Y.) 18550 - 556 $ 12985 zales ab bor tax amount (16300 X 307) Corredion of ovenafatementi, gf poior yean 16300 4890 (6300 ПЧ10 Gair on dale gdiscontinued Esgment aneto abbertax -(a5509 35500 - хз30з)

: 35500 10650 $ 24850 O0 Tncome from bebore income baxes Panticalan Amount Amount p $ 14,300 Neb sales $ 1001500 Interest nevenue Gain foom settling lawsuit Total orevenues & gains $. 44,300 $ 1060100 Coaf gf goods sold Depreciation expenx - equipmert Depreciation expense- uildings Cther opirating expeni es hors on sale f equipment $485,500 $34,300 $ 52, 30 0 $ 106,400 $26, 150 hors from setbling laosit Tobal $ 24 050 expenses Pncome from Continung opunahioms before fax $ 129000 $ 331100 ncome rom Continuing operations before tar - $3310 6 income taxes expense Income from Continuing operatina bebore Income tar expenses %3D tax X 30 %.

NO $ 331100 X 30 /. 99330 Income baxes experse $ 99330 ©e ncore fae Corlinuing sevatione bber tomes Incorne hom continuing cpenalions abben tames = Income from corbinuing operations bebore Gaxes Income bazes experse ११330 331100 $ 231740. 'Income from conbinuing openahi ons abber tazes = $231 770