Required Answer each of the following questions by providing supporting computations. 1. Assume that the company’s income tax rate is 30% for all items. Identify the tax effects and after-tax amounts of the three items labeled pretax. 2. Compute the amount of income from continuing operations before income taxes. What is the amount of the income tax expense? What is the amount of income from continuing operations? 3. What is the total amount of after-tax income (loss) associated with the discontinued segment? 4. What is the amount of net income for the year? Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow.DebitCredita. Interest revenue.....$ 14,000$ 34,000b. Depreciation expense-Equipment.c. Loss on sale of equipment...d. Accounts payable....e. Other operating expenses .f. Accumulated depreciation-Equipment .g. Gain from settlement of lawsuit....h. Accumulated depreciation-Buildingsi. Loss from operating a discontinued segment (pretax).j. Gain on insurance recovery of tornado damagek. Net sales.....1. Depreciation expense-Buildings.25,85044,000106,40071,60044,000174,50018,25020,000998,00052,000m. Correction of overstatement of prior year's sales (pretax)..16,000n. Gain on sale of discontinued segment's assets (pretax)o. Loss from settlement of lawsuit...p. Income tax expense..q. Cost of goods sold.34,00023,250?482,500

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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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Required
Answer each of the following questions by providing supporting computations.
1. Assume that the company’s income tax rate is 30% for all items. Identify the tax effects and after-tax
amounts of the three items labeled pretax.
2. Compute the amount of income from continuing operations before income taxes. What is the amount
of the income tax expense? What is the amount of income from continuing operations?
3. What is the total amount of after-tax income (loss) associated with the discontinued segment?
4. What is the amount of net income for the year?

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.....
$ 14,000
$ 34,000
b. Depreciation expense-Equipment.
c. Loss on sale of equipment...
d. Accounts payable....
e. Other operating expenses .
f. Accumulated depreciation-Equipment .
g. Gain from settlement of lawsuit....
h. Accumulated depreciation-Buildings
i. Loss from operating a discontinued segment (pretax).
j. Gain on insurance recovery of tornado damage
k. Net sales.....
1. Depreciation expense-Buildings.
25,850
44,000
106,400
71,600
44,000
174,500
18,250
20,000
998,000
52,000
m. Correction of overstatement of prior year's sales (pretax)..
16,000
n. Gain on sale of discontinued segment's assets (pretax)
o. Loss from settlement of lawsuit...
p. Income tax expense..
q. Cost of goods sold.
34,000
23,250
?
482,500

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