Question

For the year ending December 31, 2021, Olivo Corporation had income from continuing operations before taxes of $1,350,000 before considering the following transactions and events. All of the Items described below are before taxes and the amounts should be considered material 1. In November 2021, Olivo sold its PizzaPasta restaurant chain that qualified as a component of an entity. The company had adopted a plan to sell the chain in May 2021. The income from operations of the chain from January 1, 2021, through November was $175,000 and the loss on sale of the chain's assets was $330,000. 2. In 2021. Olivo sold one of its six factories for $1,500,000. At the time of the sale, the factory had a book value of $1,250,000. The factory was not considered a component of the entity 3. In 2019, Olivo's accountant omitted the annual adjustment for patent amortization expense of $135,000. The error was not discovered until December 2021. Required: Prepare Olivo's income statement, beginning with income from continuing operations before taxes, for the year ended December 31, 2021. Assume an income tax rate of 25%. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

	OLIVO CORPORATION
	Partial Income Statement
	For the Year Ended December , 2021
Income from Continuing Operation		$1600000
Less Taxaes @ 25% on 1600000		400000
Income from Continuing Operations		1200000
Discontinued Operation
Loss on Discountued Business	-155000
Tax Saving on @25% on 155000	38750
Loss on Discountiinued Operation		-116250
Net Income		$1083750

Workings

1) Adjusted Income from Continuing Operation before Income Tax

		$
Income from Continuing Operation before Taxes		1350000
Gain or Loss on Sales of Factory	$(1500000-1250000)	250000
Adjusted Income from Continuing Operation		1600000

2) Gain or Loss from the Discontinue Business

Profit from Discountinue business		175000
Sale of Pizza chain on Loss		(330000)
Net loss of Discountinue business		$(155000)

3) The Omission of Patent amortisation which was where of 2019 are past year adjustment , and will be adjusted through reatined earnings and will not be charge in Income Statement .

4) Losses with save tax hence the Loss amount will be decrease by such amount of tax .