Chicken Wings Company prepared the following income statement for the year ended December 31, 2020: Sales Cost of Goods Sold Gross profit Gain on sale of equipment P 6,000,000 (2,800,000) P 3,200,000 100,000 P 3,300,000 ( 500,000) ( 300,000) P 2,500,000 ( 875,000) P 1,625,000 Total Income Operating expenses Casualty loss Income before tax Income tax Net income • Income tax rate is 30%. • Third quarter sales were 30% of total sales. For interim reporting purposes, a gross profit rate of 40% can be justified. Variable operating expenses are allocated in the same proportion as sales. Fixed operating expenses are allocated based on expiration of time. Of the total operating expenses, P400,000 relate to variable expenses. The equipment is sold on September 1, 2020. The casualty loss occurred on June 5, 2020.

Chicken Wings Company prepared the following income statement for the year ended December 31, 2020: Sales Cost of Goods Sold Gross profit Gain on sale of equipment P 6,000,000 (2,800,000) P 3,200,000 100,000 P 3,300,000 ( 500,000) ( 300,000) P 2,500,000 ( 875,000) P 1,625,000 Total Income Operating expenses Casualty loss Income before tax Income tax Net income • Income tax rate is 30%. • Third quarter sales were 30% of total sales. For interim reporting purposes, a gross profit rate of 40% can be justified. Variable operating expenses are allocated in the same proportion as sales. Fixed operating expenses are allocated based on expiration of time. Of the total operating expenses, P400,000 relate to variable expenses. The equipment is sold on September 1, 2020. The casualty loss occurred on June 5, 2020.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

What is the income before tax for the third quarter ended September 30, 2020?

a. P406,250

b. P375,000

c. P675,000

d. P275,000

Chicken Wings Company prepared the following income statement for the year ended December 31, 2020:
P 6,000,000
(2,800,000)
P 3,200,000
Sales
Cost of Goods Sold
Gross profit
Gain on sale of equipment
Total Income
Operating expenses
Casualty loss
Income before tax
Income tax
100,000
P 3,300,000
( 500,000)
( 300,000)
P 2,500,000
|( 875,000)
P 1,625,000
Net income
• Income tax rate is 30%.
• Third quarter sales were 30% of total sales.
• For interim reporting purposes, a gross profit rate of 40% can be justified.
Variable operating expenses are allocated in the same proportion as sales. Fixed operating expenses
are allocated based on expiration of time. Of the total operating expenses, P400,000 relate to
variable expenses.
• The equipment is sold on September 1, 2020.
The casualty loss occurred on June 5, 2020.
What is the income before tax for the third quarter ended September 30, 2020?

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