Below is the Income Statement of Babana Inc. for the current year: Sales 18,000,000Less: Cost of goods sold 8,400,000Gross income 9,600,000Gain on sale of equipment 300,000Total income 9,900,000Less: Operating expenses 1,500,000Casualty loss 900,000Income before tax 7,500,000Less: Income tax 30% 2,250,000Net income 5,250,000 Additional information:Third quarter sales were 30% of total sales.For interim reporting purposes, a gross profit of 40% can justified.Variable operating expenses are allocated in the same proportion as sales.Fixed operating expenses are allocated based on the expiration of time.Of the total operating expenses, P1,200,000 relate to variable expenses and P300,000 relate to fixed expenses.The equipment was sold on June 1.The casualty loss occurred on September 1.What amount should be reported as net income for the third quarter ended September 30?A. 1,560,000B. 825,000C. 577,500D. 925,000

Net Income is the income after reducing all the expenses including income tax. The calculation is…

Answered: Below is the Income Statement of Babana…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Below is the Income Statement of Babana Inc. for the current year:

Sales 18,000,000

Less: Cost of goods sold 8,400,000

Gross income 9,600,000

Gain on sale of equipment 300,000

Total income 9,900,000

Less: Operating expenses 1,500,000

Casualty loss 900,000

Income before tax 7,500,000

Less: Income tax 30% 2,250,000

Net income 5,250,000

Additional information:

Third quarter sales were 30% of total sales.
For interim reporting purposes, a gross profit of 40% can justified.
Variable operating expenses are allocated in the same proportion as sales.
Fixed operating expenses are allocated based on the expiration of time.
Of the total operating expenses, P1,200,000 relate to variable expenses and P300,000 relate to fixed expenses.
The equipment was sold on June 1.
The casualty loss occurred on September 1.

What amount should be reported as net income for the third quarter ended September 30?

A. 1,560,000
B. 825,000
C. 577,500
D. 925,000

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions