C) a credit to common stock for $50,000. Use the following items from Diamond Co
ID: 2453556 • Letter: C
Question
C) a credit to common stock for $50,000.
Use the following items from Diamond Company's income statementto compute its net income:
Cost of goods sold
$320,000
Selling, general and administrative expenses
75,000
Miscellaneous income
40,000
Net sales
540,000
Income tax expense
55,000
Net loss from discontinued operations (net of tax)
(20,000)
Cumulative effect of a change in accounting for income taxes(net of tax)
50,000
A) Loss from discontinued operationsof $100,000.
B) Loss from discontinued operationsof $30,000.
C) Loss from discontinued operationsof $70,000.
What net income or net loss per share would the company reportfor 2008 if it had 180,000 shares of common stock outstanding?
A) $1.33.
B) $2.33.
C) ($1.87).
Cost of goods sold
$320,000
Selling, general and administrative expenses
75,000
Miscellaneous income
40,000
Net sales
540,000
Income tax expense
55,000
Net loss from discontinued operations (net of tax)
(20,000)
Cumulative effect of a change in accounting for income taxes(net of tax)
50,000
Explanation / Answer
45. a) Answer -choice D (both a and c would be included). b) NetSales 540,000 - COGS 320,000 GrossMargin 220,000 -SGA expenses 75,000 Income from operations before tax 145,000 minus I.taxes 55,000 Income from continuing operations 90,000 Discontinued Net loss from discontinued (net oftaxes) (20,000) Income before extra- ordinary & accounting change 70,000 cumulative effect of accounting change intaxes 50,000 NetIncome 120,000 c) 1. Income from continuingoperations 260,000 -Discontinued (net of taxes30,000) (70,000) Income beforeextra-ordinary 190,000 - Extra-ordinary Loss (net of taxes9,000) (21,000) NetIncome 169,000 2. Choice C - Loss from discontinued operationsof 70,000 3.Net income per share 169,000 180,000 = 0.94 ( Choice D )
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