Question

QUESTION 19

1. Henderson Corporation includes in its results for the year ended December 31, 2019 the following items:

   Gain on Sale of Investments	$20,000
   Cash	1,600,000
   Interest Expense	15,000
   Cost of Goods Sold	4,500,000
   Selling Expenses	500,000
   Restructuring Costs	344,000
   Accounts Payable	40,000
   Sales	7,600,000
   Administrative Expenses	96,000
   Sales Returns	200,000

   
   Additional Information:
   

   1) Henderson’s effective tax rate is 30%.

   2) Henderson sells the assets of a particular division on December 15, 2019 at a price of $500,000. The net book value of the division’s assets at the time of sale is $800,000. The division has before-tax operating income from operations of $75,000 from the beginning of the year through December 15, 2019.

   What is net income?

   	A.	$1,964,000.
   	B.	$2,265,000.
   	C.	$1,218,000.
   	D.	$1,375,000.

Answer 1

Sales		$        7,600,000
Sales returns		$            200,000
Net sales		$        7,400,000
Cost of goods sold		$        4,500,000
Gross profit		$        2,900,000
Less: Opertaing expenses
Administrative Expenses	$    96,000
Selling expenses	$ 500,000	$            596,000
Profit before interest		$        2,304,000
Interest expense		$              15,000
		$        2,289,000
Other income
gain on sale of investments	$              20,000
		$        2,309,000
Extraordinary items
Restructuring costs		$            344,000
Income from continuing operations
before income tax		$        1,965,000
Income tax @ 30%		$            589,500
Net income		$        1,375,500

Option D is the correct answer

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