Prepare the lower portion of the 2011 income statement beginning with $790,000.

Memorax Company earned before-tax income of $790,000 for its 2011 fiscal year. During the year, the company experienced a $520,000 loss from earthquake damage that it considered to be an extraordinary item. This loss is not included in the $790,000 before-tax income figure. The company's income tax rate is 40%. Prepare the lower portion of the 2011 income statement beginning with $790,000.

Expert Solution

MEMORAX COMPANY

Partial Income Statement

For the Year Ended December 31, 2011

Income before income taxes and extraordinary item...............................................................................................$ 790,000

Income tax expense*..................................................................316,000

Income before extraordinary item ......................................474,000

Extraordinary item:

Loss from earthquake, net of $208,000 tax benefit...........................................................................................(312,000)

Net income ...............................................................................$ 162,000

*$790,000 x 40%

The net income is $ 162,000.

Renze Joy Candido answered 2 years ago

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