In 2011, Jeffrey Company disposed of a segment of its business and incurred a pr

Question

In 2011, Jeffrey Company disposed of a segment of its business and incurred a pretax loss on the disposal of $40,000. In the same year, a flood caused $15,000 of damages to the building. The flood damage qualified as an extraordinary item. Income from continuing operations before taxes was $100,000 for 2011 and the 20 percent tax rate applied to all of the items above. Prepare a partial income statement starting with income from continuing operations before taxes for the year 2011 and concluding with net income.

Explanation / Answer

net pretax loss = $ 65000 pre tax income = $ 100000 gain = $35000 tax = .2 * 35000 = $7000 net income = $28000

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