Required information Problem 17-6AA Income statement computations and format LO

Question

Required information

Problem 17-6AA Income statement computations and format LO A2

[The following information applies to the questions displayed below.]

Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31, 2017, follow.

Problem 17-6 Part 1

Required:
1. Assume that the company’s income tax rate is 40% for all items. Compute the tax effects and after-tax amounts of the three items labeled pretax.

Required information

Problem 17-6AA Income statement computations and format LO A2

[The following information applies to the questions displayed below.]

Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31, 2017, follow.

Problem 17-6 Part 1

Required:
1. Assume that the company’s income tax rate is 40% for all items. Compute the tax effects and after-tax amounts of the three items labeled pretax.

Required information

Problem 17-6AA Income statement computations and format LO A2

[The following information applies to the questions displayed below.]

Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31, 2017, follow.

Problem 17-6 Part 1

Required:
1. Assume that the company’s income tax rate is 40% for all items. Compute the tax effects and after-tax amounts of the three items labeled pretax.

What is the amount of income from continuing operations before income taxes?

What is the amount of the income taxes expense?

What is the amount of income from continuing operations?

What is the total amount of after-tax income (loss) associated with the discontinued segment?

  

What is the amount of net income for the year?

Debit Credit a. Interest revenue $ 14,500 b. Depreciation expense—Equipment. $ 34,500 c. Loss on sale of equipment 26,350 d. Accounts payable 44,500 e. Other operating expenses 106,900 f. Accumulated depreciation—Equipment 72,100 g. Gain from settlement of lawsuit 44,500 h. Accumulated depreciation—Buildings 175,500 i. Loss from operating a discontinued segment (pretax) 18,750 j. Gain on insurance recovery of tornado damage 29,620 k. Net sales 1,003,500 l. Depreciation expense—Buildings 52,500 m. Correction of overstatement of prior year’s sales (pretax) 16,500 n. Gain on sale of discontinued segment’s assets (pretax) 36,500 o. Loss from settlement of lawsuit 24,250 p. Income taxes expense ? q. Cost of goods sold 487,500

Explanation / Answer

1)

2)

amount of income from continuing operations before income taxes:

3)Income tax expense :330500*.40 = 132200

4)Income from continuing operations after taxes=Income from continuing operations before taxes-Income tax expense

   =330500-132200

   = 198300

5)after-tax income (loss) associated with the discontinued segment=Loss from operating a discontinued segment+Gain on sale of discontinued segment’s assets

-11250+21900

   10650

6)Net Income: 198300+10650 = 208950

Pre tax 40% tax After tax Loss from operating a discontinued segment -18750 18750*.40= -7500 -18750+7500=-11250 Correction of overstatement of prior year’s sales -16500 16500*.40=-6600 16500-6600=-9900 Gain on sale of discontinued segment’s assets 36500 36500*.40=14600 36500-14600=21900

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