Question

The following information is available from the accounting records of Manahan Co. for the year ended December 31, 2016:

Net cash provided by financing activities	$	118,000
Dividends paid		18,400
Loss from discontinued operations, net of tax savings of $41,367		124,100
Income tax expense		27,355
Other selling expenses		12,000
Net sales		649,200
Advertising expense		46,500
Accounts receivable		57,000
Cost of goods sold		370,044
General and administrative expenses		142,500

a. Calculate the operating income for Manahan Co. for the year ended December 31, 2016

	MANAHAN CO. Operating Income Statement For the year ended December 31, 2016 $0 Expenses: 0 $0

B)

Calculate the company's net income for 2016.

Answer 1

A) Calculation of Operating income   (Amount in $)

MANAHAN CO.
Operating Income Statement
For the year ended December 31, 2016
Net sales		649,200
Cost of goods sold		(370,044)
Gross Profit		279,156
Expenses:
Advertising expense	(46,500)
Other selling expenses	(12,000)
General and administrative expenses	(142,500)
Total Expenses		(201,000)
Operating Income		78,156
Operating Income		$78,156

B) Since Mahanon co. did not report any interest expense, or other income or expense, the operating income amount calculated in part A also represents the firm's "Income before taxes".The calculation of company's net income is shown as follows:-

Calculation of company's net income (Amount in $)

Income before taxes (Operating income)	78,156
Income tax expense	(27,355)
Income from continuing operations (A)	50,801
Loss from discontinued operations, net of tax savings of $41,367 (B)	(124,100)
Net Loss (A+B)	(73,299)

Thus there is a net loss of $73,299 to the company for 2016.