Use the following items from Diamond Company\'s income statementto compute its n
ID: 2457502 • Letter: U
Question
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
A
INCOME STATEMENT
$
5,40,000
-320000
2,20,000
-75000
1,45,000
40,000
1,85,000
-55,000
1,30,000
-20000
1,10,000
B
1
78000
1,82,000
70,000
1,12,000
21,000
91,000
2
3
A
INCOME STATEMENT
$
Net Sales5,40,000
Cost of goods sold-320000
Gross profit on sales2,20,000
Selling and administrative expenses-75000
Income from operation1,45,000
add: miscellaneous income40,000
Income before income taxes1,85,000
less: Income tax-55,000
Income after tax1,30,000
less: Net loss from discontinued operation (nettax)-20000
Net Income1,10,000
B
1
Income from continuing operation before income tax $2,60,000 less: Income tax (30% of 260000)78000
Income from continuing operation1,82,000
Less: Discontinued operation loss from disposal less tax of 30,00070,000
(1,00,000 - 30,000) Income before extraordinary item1,12,000
less: loss from flood,less applicable income tax 30% of30,000 (30,000 -9,000)21,000
Net Income91,000
2
Loss from Discontinued Operation $70,000 for 20083
Earning per share = Net Income /common share outstanding Earning per share = 91000 /180000 =$0.51Related Questions
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