Question

Which of the following is not a generally practiced method of presenting the income statement?

a.   Including prior period adjustments in determining net income

b.   The single-step income statement

c.   The consolidated statement of income

d.   Including gains and losses from discontinued operations of a component of a business in determining net income

       2.. Catt Company, with an applicable income tax rate of 30%, reported net income of $560,000. Included in income for the period was a loss from discontinued operations of $80,000 before deducting the related tax effect. The company's “income from continuing operations” was

            a.   $640,000.

            b.   $800,000.

            c.   $880,000.

            d.   $616,000.

       3. Refer to the previous question. The amount reported as”income from continuing operations before income tax” is:

            a.   $640,000.

            b.   $800,000.

            c.   $880,000.

            d.   $616,000.

       4. Refer to the previous two questions. The amount reported as”income tax expense” on the income statement is:

            a.   $288,000

            b.   $264,000

            c.   $240,000

            d.   $24,000

       5. Nance Corp. reports operating expenses in two categories: (1) selling and (2) general and administrative. The adjusted trial balance at December 31, 2016, included the following expense accounts:

            Accounting and legal fees                                                    $240,000

            Advertising                                                                             300,000

            Freight-out                                                                             150,000

            Freight-in                                                                                  20,000

            Interest                                                                                   120,000

            Loss on sale of long-term investments                                   60,000

            Cost of goods sold                                                                 530,000

            Officers' salaries                                                                    360,000

            Rent for office space                                                             320,000

            Sales salaries and commissions                                           220,000

            One-half of the rented premises is occupied by the sales department.

            How much of the expenses listed above should be included in Nance's selling expenses for 2016?

            a.   $520,000.

            b.   $670,000.

            c.   $680,000.

            d.   $830,000.

just need the solutions for these thank you

Answer 1

• You have all the correct answers, and have only asked for calculations and working for the selected answers.
• Question 1

--Correct Answer: Option ‘a’ Including Prior period adjustments in determining Net Income is NOT a generally practiced method of presenting the Income Statement BECAUSE such adjustments are made in Statement of Stockholder’s Equity part and not in the Income Statement.

• Question 2

A	Discontinued Operation before Tax	$            80,000.00
B	Tax Rate	30%
C = A x B	Tax Effect on above	$            24,000.00
D	Net Income reported	$          560,000.00
E = (A - C) + D	Income from Continuing Operation	$          616,000.00
	Correct Answer	Option 'D' $ 616,000

• Question 3

A	Income from Continuing Operation	$          616,000.00
B = 100% - 30% tax rate	% of Income before tax	70%
C = A/B	Income from Operations before income tax	$          880,000.00
	Correct Answer	Option 'C' $ 880,000

• Question 4

A	Income from Operations before income tax	$          880,000.00
B	Income from Continuing Operation	$          616,000.00
C = A - B	Income Tax Expense	$          264,000.00
	Correct Answer	Option 'B' $ 264,000

• Question 5

Advertising	$          300,000.00
Freight out	$          150,000.00
Sales Salaries & Commission	$          220,000.00
Rent (50%)	$          160,000.00
Total Selling Expense	$          830,000.00
Correct Answer	Option 'D' $ 830,000