In: Accounting
5.
For the year ending December 31, 2021, Olivo Corporation had income from continuing operations before taxes of $1,280,000 before considering the following transactions and events. All of the items described below are before taxes and the amounts should be considered material.
Required:
Prepare Olivo’s income statement, beginning with income from
continuing operations before taxes, for the year ended December 31,
2021. Assume an income tax rate of 25%. Ignore EPS disclosures.
(Amounts to be deducted should be indicated with a minus
sign.)
Olivo corporation | ||||
Income statement ( partial ) | ||||
Income from Continuing operations before taxes | 1460000 | ( see Working note ) | ||
Less:- Income Tax ( 25 % ) | 365000 | |||
Income from Continuing operations | 1095000 | |||
Discontinued Operations | ||||
Loss from disposal of subsidiary | -316000 | |||
Add:- Income tax benefit ( 25 % ) | -79000 | -237000 | ||
Gain from the operations of discontinued subsidiary | 168000 | |||
Less:- Income tax expense ( 25 % ) | 42000 | 126000 | ||
Loss form discontinued operations ( net of tax ) | -111000 | |||
Net income | 984000 | |||
Working note:- | ||||
Computation of Income from Continuing operations before taxes :- | ||||
Income from Continuing operations before taxes ( as provided ) | 1280000 | |||
Less:- Loss on sale of factory | ||||
Sale proceeds | 1360000 | |||
Less:- book value | -1180000 | |||
profit on sale | 180000 | |||
As restated | 1460000 | |||
Omission of patent amortisation will gi in retained earnings. | ||||