Question

A company has the following results for the year ending December 31, 2020

Sales Revenue	$4,995,000
Cost of Goods Sold	$1,785,000
Salaries and Wages Expense	$602,000
Sales Commissions	$575,000
Sales Discounts	$490,000
Other Administrative Expenses	$307,000
Depreciation of Equipment	$189,000
Rent Revenue	$120,000
Advertising Expense	$85,000
Interest Expense	$55,000
Dividend Revenue	$30,000
Loss of Sale of Investments	$7,000

On September 1, 2020, the company decided to eliminate a division. During 2020, losses relating to the eliminated division total $253,000. The above results in the table do not include this amount.

The company's income tax rate is 40%. All given amounts are pre-tax figures.

What is the company's net income or loss from 2020?

Answer 1

Answer: Net income $478,200

Calculations:

Income statement (multi-step)
For the year ended December 31, 2020
Sales Revenue		$ 4,995,000
Cost of goods sold		($ 1,785,000)
Gross profit		$ 3,210,000
Selling expense:
Salaries and Wages expense	$ 602,000
Sales Commissions	$ 575,000
Sales Discounts	$ 490,000
Advertising expense	$ 85,000
Total selling expenses		$ 1,752,000
Administrative expenses:
Depreciation of Equipment	$ 189,000
Other Administrative Expenses	$ 307,000
Total administrative expenses		$ 496,000
Operating income		$ 962,000
Other income (expese):
Rent revenue	$ 120,000
Dividend Revenue	$ 30,000
Interest expense	($ 55,000)
Loss of sale of Investments	($ 7,000)
Other income (net)		$ 88,000
Income from continuing operations before income taxes		$ 1,050,000
Income tax [1,050,000 x 40%]		$ 420,000
Income from continuing operations		$ 630,000
Discountinued operations:
Losses relating to eliminated division [$253,000 x 60%]		($ 151,800)
Net income		$ 478,200