EXAM 2 CHAPTERS 16-1 -> C |erto.mheducationcom/hrn.tpx Questions 2-6 fof 14 me f

Question

EXAM 2 CHAPTERS 16-1 -> C |erto.mheducationcom/hrn.tpx Questions 2-6 fof 14 me following information applies to the questions displayed below Selected account balances from the adjusted trial balance for Olinde Corporation as of its calender year end December 31, 2015, follow a. Interest revenue S 15.900 s 35.900 27750 C. Loss on sale of equipment d Accounts payable e. Other operaing expenses 45.900 08.300 g Gain from settlement of lawsut h. Accumulated 73.500 45.900 78.300 20150 t Loss from operating a discontinued segment (pretax) J Gain on insurance recovery of tornado damage (pretax and extraordinery) k. Net sales L Depreciaton expense-Buildings m Correction of overstatement of prior year's sales (presax) n. Gan on sale of discontinued segment's assets (pretax) o. Loss from setiement of lewsut p. Income taxes expense q Cost of goods sold 31,020 1017,500 53.900 17.900 25.650 501,500 43.500 2. 1. Assume that the company's income tax rate is 30% for all items Compute the tax effects and aber-tax amounts of the four items labeled pretax (Loss amounts should be indicated with a minus sign.) Pretax 30% Tax Effect After-Tax Loss from operating a discontinued segment Gain on insurance recovery of tornado damage Correction of overstatement of prior year's sales Gain on sale of discontinued segment s assets

Explanation / Answer

Multi-step Income Statement Net Sales 1017500 Less: Cost of good sold 501500 Gross profit 516000 Less: Operating expenses: Depreciation expense-Equipment 35900 Depreciation expense-Buildings 53900 Other operating expenses 108300 Loss from settlement of lawsuit 25650 Loss on sale of equipment 27750 Gain from settlement of lawsuit -45900 205600 Net operating income 310400 Non-operating Income/(Expense): Interest revenue 15900 Income from continuing operations before tax 326300 Less: Income tax at 30% 97890 Income from continuing operations after tax 228410 Prior-period item(after-Tax) : Correction of overstatement of prior year's sales -12530 Discontinued operations After-tax (Gain/(loss) Loss from operating a discontinued segment -14105 Gain on sale of discontinued segment's assets 30450 16345 Extraordinary items:after-taxGain/(loss) Gain on insurance recovery of tornado damage 21714 Net Income for the year 253939 1 Pretax 30% Tax effect After-tax Loss from operating a discontinued segment 20150 6045 14105 Tax savings to the extent of 6045 Gain on insurance recovery of tornado damage 31020 9306 21714 Gain net of tax Correction of overstatement of prior year's sales 17900 5370 12530 Tax savings to the extent of 5370 Gain on sale of discontinued segment's assets 43500 13050 30450 Gain net of tax 2.1 Income from continuing operations before income taxes 326300 2.2 Amount of income tax expense 97890 2.3 Amt.of income from continuing operations 228410 3. Total amt.of after-tax income /(loss)associted with discontinued segment: 16345 4 Amt. of income/(loss) of extraordinary item: 21714 5. Amt.of income for the Year= 253939

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