Selected account balances from the adjusted trial balance for Zen Corporation as of its calendar year-end December 31, 2011, follow.
|
| Debit | Credit |
a. | Income taxes expense | $ ? |
|
b. | Correction of overstatement of prior year’s sales (pretax) | 17,000 |
|
c. | Loss on sale of machinery | 26,850 |
|
d. | Loss from settlement of lawsuit | 24,750 |
|
e. | Other operating expenses | 107,400 |
|
f.. | Accumulated depreciation—Machinery |
| $ 72,600 |
g | Gain from settlement of lawsuit |
| 45,000 |
h. | Accumulated depreciation—Buildings |
| 175,500 |
i | Loss from operating a discontinued segment (pretax) | 19,250 |
|
j | Gain on insurance recovery of tornado damage (pretax and extraordinary) |
| 30,120 |
k. | Net sales |
| 999,500 |
l | Depreciation expense—Buildings | 53,000 |
|
m. | Depreciation expense—Machinery | 35,000 |
|
n. | Gain on sale of discontinued segment’s assets (pretax) |
| 35,000 |
o. | Accounts payable |
| 45,000 |
p. | Interest revenue |
| 15,000 |
q. | Cost of goods sold | 483,500 |
|
Required
Answer each of the following questions by providing supporting computations.
1. Assume that the company’s income tax rate is 30% for all items. Identify the tax effects and after-tax amounts of the four items labeled pretax.
2. What is the amount of income from continuing operations before income taxes? What is the amount of the income taxes expense? What is the amount of income from continuing operations?
3. What is the total amount of after-tax income (loss) associated with the discontinued segment?
4. What is the amount of income (loss) before the extraordinary items?
5. What is the amount of net income for the year?
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