Question

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

Answer 1

	Statement of Comprehensive Income
	For the year ended December 31, 2020
			Amount $
	Sales revenue		$                    1,70,000
	Cost of good sold		$                                -
	Gross Profit		$                   1,70,000
	Operating Expenses		$                       70,000
	Income from operation before taxes		$                   1,00,000
	Non-Operating items
	Gain on sale of equipment	$                       16,000
	Loss on wipe-out of warehouse	$                  (1,00,000)
	Loss on sale of securities	$                        (4,000)
	Total Other Income(Net)		$                     (88,000)
	Income from Continuing operation before taxes		$                       12,000
	Less: Income Taxes($12000*25%)		$                        (3,600)
	Income from Continuing operation		$                         8,400
	Income from Discontinued operation before taxes	$                 13,000.00
	Loss from Discontinued operation before taxes	$                (23,000.00)
	Less: Tax Benefit from loss on discontinued operation (10,000*25%)	$                    2,500.00
	Income from Discontinued operation		$                 (7,500.00)
	Net Income		$                             900
	Other Comprehensive income adjustment
	Unrealised gain on Available for sale securities		$                         8,000
	Total Comprehensive Income		$                         8,900
	None of the other answer choices is correct.
	Please do upvote if you found the answer useful.
	Feel free reach in the comment section in case of any clarification or queries.