Question

In: Accounting

Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end...

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 $ 14,600
b. Depreciation expense—Equipment. $ 34,600
c. Loss on sale of equipment 26,450
d. Accounts payable 44,600
e. Other operating expenses 107,000
f. Accumulated depreciation—Equipment 72,200
g. Gain from settlement of lawsuit 44,600
h. Accumulated depreciation—Buildings 175,700
i. Loss from operating a discontinued segment (pretax) 18,850
j. Gain on insurance recovery of tornado damage 29,720
k. Net sales 1,004,500
l. Depreciation expense—Buildings 52,600
m. Correction of overstatement of prior year’s sales (pretax) 16,600
n. Gain on sale of discontinued segment’s assets (pretax) 37,000
o. Loss from settlement of lawsuit 24,350
p. Income taxes expense ?
q. Cost of goods sold 488,500
a.What is the amount of income from continuing operations before income taxes?
b. What is the amount of the income taxes expense?
c. What is the amount of income from continuing operations?

d.What is the amount of net income for the year?

Solutions

Expert Solution

a) Income from continuing operations before income taxes
Particulars amount amount
net sales 1004500
interest revenue 14600
gain from settlement of lawsuit 44600
Total revenue (A) 1063700
expenses
cost of goods sold 488500
depreciation expenses-equipment 34600
depreciation expenses-building 52600
other operating expenses 107000
loss on sale of equipment 26450
loss from settling lawsuit 24350
total expenses (B) 733500
Income from continuing operations before income taxes (A)-(B) 330200
b) income tax expenses = income from continuing operation before tax*rate of tax
income tax expenses = 330200*30% = 99060
assuming rate of income tax = 30%
c) Income from continuing operations
income from continuing operations before taxes 330200
less: income tax expenses @30% 99060
Income from continuing operations 231140
calculation of income (loss) from discontnued segment
loss from operating discontinued segment-after tax (1-0.30)*18850 -13195
gain on sale of discontinued segment-after tax (1-0.30)*37000 25900
income from discontinued segment 12705
income before extraordinary items
income from continued operating-after tax 231140
income from discontinued segment 12705
income before extraordinary items 243845
d) calculation of net income
income before extraordinary items 243845
add: gain on insurance recovery of tornado damage (1-0.30)*29720 20804
net income 264649

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ekkarill92 answered 1 year ago
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