Question

Cash Administrative expenses Selling expenses Net sales Cost of goods sold Cash dividends declared (2020) Cash dividends paid (2020) Discontinued operations (loss before income taxes) Depreciation expense, not recorded in 2019 Retained earnings, December 31, 2019 Effective tax rate 20% $65,000 130,000 104,000 702,000 273,000 26,000 19,500 52,000 39,000 117,000 Compute net income for 2020. Net income $ e Textbook and Media

Answer 1

Answer:

1		Amount $
Net sales		702000
Less:
Cost of goods sold	273000
Administrative expenses	130000
Selling expenses	104000
Discontinued operations	52000	559000
Income before income tax		143000
Income tax @ 20%		28600
Net income		$28600
2
Income Statement
For the year ended December 31, 2020
Income before income tax	195000
Income tax @20%	39000
Income from continuing operations	156000
Discontinued operations, net of tax	(41600)	=52000*(1-20%)
Net income	$114400
Earnings per share:
Income from continuing operations  (156000/ 10,000)	15.6
Loss on discontinued operations, net of tax (41600/10000)	(4.16)
Net income	$11.44

Note:

Income from continuing operations before income tax

Sales-Cost of goods sold - Administrative expense - Selling expense

= 702000 - 273000 – 130000 – 104000 = $195000