Question

Required information Problem 13-6AA 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.

Debit Credit a. Interest revenue $ 15,000

b. Depreciation expense—Equipment. $ 35,000

c. Loss on sale of equipment 26,850

d. Accounts payable 45,000

e. Other operating expenses 107,400

f. Accumulated depreciation—Equipment 72,600

g. Gain from settlement of lawsuit 45,000

h. Accumulated depreciation—Buildings 176,500

i. Loss from operating a discontinued segment (pretax) 19,250

j. Gain on insurance recovery of tornado damage 30,120

k. Net sales 1,008,500

l. Depreciation expense—Buildings 53,000

m. Correction of overstatement of prior year’s sales (pretax) 17,000

n. Gain on sale of discontinued segment’s assets (pretax) 39,000

o. Loss from settlement of lawsuit 24,750

p. Income taxes expense ?

q. Cost of goods sold 492,500

Problem 13-6 Part 2

2a. What is the amount of income from continuing operations before income taxes?

2b. What is the amount of the income taxes expense?

2c. What is the amount of income from continuing operations?

Answer 1

Answer 2a)

Income from continuing operations before income taxes is $342,120.

Answer 2b)

Income taxes expense is $111,479.

Answer 2c)

Net Income from continuing operations is $230,641.

Workings:

Olinda Corporation
Income Statement
For Year Ended December 2017
Net sales	$10,08,500
Cost of goods sold	$4,92,500
Gross profit	$5,16,000
Operating Expenses:
Depreciation expense—Equipment	$35,000
Depreciation expense—Buildings	$53,000
Other operating expenses	$1,07,400
Total Operating Expenses	$1,95,400
Operating profit	$3,20,600
Less: Correction of overstatement of prior year’s sales (pretax)	-$17,000
Less: Loss on sale of equipment	-$26,850
Add: Interest revenue	$15,000
Add: Gain from settlement of lawsuit	$45,000
Add: Gain on insurance recovery of tornado damage	$30,120
Less: Loss from settlement of lawsuit	-$24,750
Income Before Tax from Continuing operations	$3,42,120
Less: Income tax expense [113,900 + 34%*(342120-335000)]	-$1,11,479
Net Income from continuing operations	$2,30,641