Summary Business Accounting

Question:

The following is a partial year-end adjusted trial balance.




Income tax expense has not yet been accrued. The income tax rate is 40%. Determine the following:

Income tax expense has not yet been accrued. The income tax rate is 40%. Determine the following:

operating income (loss), (b) income (loss) before any separately reported items, and (c) net income (loss).



Answer:

(a) Sales revenue $300,000

Less: Cost of goods sold (160,000)

General and administrative expenses (40,000)

Restructuring costs (50,000)

Selling expenses (25,000)

Operating income $ 25,000



(b) Operating income $25,000

Add: Interest revenue 4,000

Deduct: Loss on sale of investments (22,000)

Income before income taxes and 7,000

Income tax expense (40%) (2,800)

Income before extraordinary item $ 4,200