Question

1) The following is obtained from Oroko Corporation's financial controller Net sales, $90,000; cost of goods sold, $10,500; extraordinary gain (net of income taxes of $1,500), $9,500; loss from discontinued operations $25,000; loss on disposal of discontinued operations $7,500; selling expenses, $5,000; administrative expenses, $4,000; income taxes expenses on continuing operations, $10,000. Please prepare the company's income statement for the year ended December 31, 2019.

Answer 1

$90,000 $10,500 $79,500 [Net Sales - Cost of Goods Sold] $5,000 $4,000 OROKO CORPORATION Multi-Step Income Statement FOR YEAR ENDED DECEMBER 31, 2019 Net Sales Cost of Sales Gross Profit Operating Expenses: Selling Expenses Administrative Expenses Total operating expenses Income from continuing operations before taxes Income Tax Expense Income (Loss) Before Extraordinary Items Extraordinary Items: Extraordinary gain (net of income taxes) Loss from discontinued operations (net of tax) Loss on disposal of discontinued operations (net of tax) Total Extraordinary Items Net Income (Loss) $9,000 $70,500 (Gross Profit - Total Operating Expenses] $10,000 $60,500 [Income Before Taxes - Income Tax Expense] $9,500 -$21,454 $6,436 [Loss x (1 - Tax rate) = $25,000 x (1 - 14.18%)] [Loss x (1 - Tax rate) = $7,500 x (1 - 14.18%)] -$18,390 $42,110 NOTE: Income tax rate = Income tax on continuing operations / Income from continuing operations before tax = $10000 / $70500 = 0.1418 = 14.18%.