Trayer Corporation has income from continuing operations of $287,200 for the yea

Question

Trayer Corporation has income from continuing operations of $287,200 for the year ended December 31, 2014. It also has the following items (before considering income taxes). An extraordinary loss of $76,300. A gain of $47,300 on the discontinuance of a division. A correction of an error in last year's financial statements that resulted in a $14,500 understatement of 2013 net income. Assume all items are subject to income taxes at a 28% tax rate. Prepare an income statement, beginning with income from continuing operations.

Explanation / Answer

Please adjust account heads as per your chart of accounts. Income from continuing opeartions is a net tax income . For Discontinued operations and extrraordinary loss we have to adjust it to net tax basis.

Last year error has nothing to do with current year income statement

Partial Income Statement Income from Continuing operations $287,200 Discontinued operations Add: Gain from Discontinued division 34056.00 (net of taxes) * 1 Income before extraordinary items $321,256.00 Extraordinary Items Less: Extraordinary Loss 54936.00 (net of taxes) * 2 Net Income / Loss $266,320.00 1) Gain from Discontinued division 47300 Less: taxes at 28% 13244 Gain net of taxes 34056 2) extraordinary loss 76300 Less: Tax Benefit at 28 % 21364 Net Extraordinary loss 54936

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