Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow. Debit Credit a. Interest revenue $ 14,400 b. Depreciation expense—Equipment $ 34,400 c. Loss on sale of equipment 26,250 d. Accounts payable 44,400 e. Other operating expenses 106,800 f. Accumulated depreciation—Equipment 72,000 g. Gain from settlement of lawsuit 44,400 h. Accumulated depreciation—Buildings 175,300 i. Loss from operating a discontinued segment (pretax) 18,650 j. Gain on insurance recovery of tornado damage 29,520 k. Net sales 1,002,500 l. Depreciation expense—Buildings 52,400 m. Correction of overstatement of prior year’s sales (pretax) 16,400 n. Gain on sale of discontinued segment’s assets (pretax) 36,000 o. Loss from settlement of lawsuit 24,150 p. Income tax expense ? q. Cost of goods sold 486,500 Problem 17-6AA Part 2 Assume that the company’s income tax rate is 40% for all items. Compute the tax effects and after-tax amounts of the three items labeled pretax. 2a. What is the amount of income from continuing operations before income taxes? 2b. What is the amount of the income tax expense? 2c. What is the amount of income from continuing operations?

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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Problem 17-6AA Income statement computations and format LO A2

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Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow.

		Debit	Credit
a.	Interest revenue			$	14,400
b.	Depreciation expense—Equipment	$	34,400
c.	Loss on sale of equipment		26,250
d.	Accounts payable				44,400
e.	Other operating expenses		106,800
f.	Accumulated depreciation—Equipment				72,000
g.	Gain from settlement of lawsuit				44,400
h.	Accumulated depreciation—Buildings				175,300
i.	Loss from operating a discontinued segment (pretax)		18,650
j.	Gain on insurance recovery of tornado damage				29,520
k.	Net sales				1,002,500
l.	Depreciation expense—Buildings		52,400
m.	Correction of overstatement of prior year’s sales (pretax)		16,400
n.	Gain on sale of discontinued segment’s assets (pretax)				36,000
o.	Loss from settlement of lawsuit		24,150
p.	Income tax expense		?
q.	Cost of goods sold		486,500

Problem 17-6AA Part 2

Assume that the company’s income tax rate is 40% for all items. Compute the tax effects and after-tax amounts of the three items labeled pretax.

2a. What is the amount of income from continuing operations before income taxes?
2b. What is the amount of the income tax expense?
2c. What is the amount of income from continuing operations?

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