Question

1. FGH Corporation has the following information about 2020 (all numbers are given pre-tax):

   • Recorded a $16,000 gain on the sale of a piece of manufacturing equipment
   • Sales revenue for continuing operations was $170,000
   • Operating expenses for continuing operations was $71,000
   • A hurricane wiped out the storage warehouse resulting in an uninsured loss of $100,000
   • Sold a discontinued component of the business for a loss of $23,000
   • The discontinued component reported operating income of $13,000 prior to being sold
   • Equity securities were sold for a realized loss of $4,000
   • Unrealized gains on available-for-sale debt securities were $8,000

   Which of the following statements is true? Assume a 25% tax rate.

   		Income from continuing operations (pre-tax) is $95,000.
   		Income tax expense is $250.
   		Net income from continuing operations is $8,250.
   		Net income from continuing operations is $11,250.
   		None of the other answer choices is correct.
   		Net income is $6,750.
   		Net income is $9,000.

Answer 1

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FGH Corporation
Particulars	Amount $	Amount $
Sales Revenue	170,000.00
Less: returns and allowances	-
Net Sales		170,000.00
Cost of goods sold		-
Gross Profit		170,000.00
Operating expenses for continuing operations	71,000.00
Operating Expense		71,000.00
Operating Income		99,000.00
Equity securities were sold for a realized loss	(4,000.00)
Other expense and income		(4,000.00)
Income from continuing operations (pre-tax)		95,000.00
So correct answer is Income from continuing operations (pre-tax) is $95,000.