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Business Accounting Financial Accounting: Information for Decisions

1 Introduction: The pretax amount is the amount on which tax has not been applied and once the tax is incorporated into it, the after-tax amount is obtained. To compute: The tax effects and after-tax amounts of the three items labeled pretax. Particulars Pretax Effect After-tax Loss from operating a discontinued segment 18250 5475 (12775) Correction of overstatement of prior year’s sales 16000 4800 (11200) Gain on sale of discontinued segment’s assets 34000 10200 23800 Tax rate is 30% After-tax = Pretax amount × (1 − Tax) 2 Introduction: The continuing operations of a business are those segments of business which are still being carried on by the company apart from those which have been discontinued. To compute: The income from continuing operations before taxes, income tax expense and the income from continuing operations. Income from continuing operations before taxes = $332000 Income tax expense = $99600 Income from continuing operations = $232400 Particulars Amount ($) Net sales 998000 Less: Cost of goods sold 482500 Gross profit 551500 Operating expenses: Depreciation -Equipment 34000 Depreciation-Building 52000 Other operating expense 106400 Total operating expenses 192400 Operating income ( Gross profit − Total operating expenses) 323100 Other revenue/expense Interest revenue 14000 Gain from settlement of lawsuit 44000 Loss on sale of equipment (25850) Loss from settlement of lawsuit (23250) 8900 Income from continuing operations before tax 332000 Less: Income tax expense 99600 Income from continuing operations 232400 3 Introduction: The discontinued segment is the segment of the business which has been shut by the company due to any reason like the segment is not getting enough profits, it is adding more cost to the company, etc. To compute: The total amount of after-tax income associated with the discontinued segment. After-tax income associated with the discontinued segment = $11025 Particulars Amount ($) Loss from operating a discontinued segment 18250 − ( 18250 × 30 100 ) = 18250 − 5475 = ( 12775 ) Gain on sale of discontinued segment 34000 − ( 34000 × 30 100 ) = 34000 − 10200 = 23800 Income from discontinued segment 23800 − 12775 = 11025 4 Introduction: The net income is the difference of total income and total expenditure in a year. To compute: The amount of net income for the year. Net income = $257425 Particulars Amount ($) Income from continuing operations 232400 Total income from discontinued operations after tax 11025 Gain on insurance recovery of tornado damage 20000 − ( 20000 × 30 100 ) = 14000 Net income 257425

1 Introduction: The pretax amount is the amount on which tax has not been applied and once the tax is incorporated into it, the after-tax amount is obtained. To compute: The tax effects and after-tax amounts of the three items labeled pretax. Particulars Pretax Effect After-tax Loss from operating a discontinued segment 18250 5475 (12775) Correction of overstatement of prior year’s sales 16000 4800 (11200) Gain on sale of discontinued segment’s assets 34000 10200 23800 Tax rate is 30% After-tax = Pretax amount × (1 − Tax) 2 Introduction: The continuing operations of a business are those segments of business which are still being carried on by the company apart from those which have been discontinued. To compute: The income from continuing operations before taxes, income tax expense and the income from continuing operations. Income from continuing operations before taxes = $332000 Income tax expense = $99600 Income from continuing operations = $232400 Particulars Amount ($) Net sales 998000 Less: Cost of goods sold 482500 Gross profit 551500 Operating expenses: Depreciation -Equipment 34000 Depreciation-Building 52000 Other operating expense 106400 Total operating expenses 192400 Operating income ( Gross profit − Total operating expenses) 323100 Other revenue/expense Interest revenue 14000 Gain from settlement of lawsuit 44000 Loss on sale of equipment (25850) Loss from settlement of lawsuit (23250) 8900 Income from continuing operations before tax 332000 Less: Income tax expense 99600 Income from continuing operations 232400 3 Introduction: The discontinued segment is the segment of the business which has been shut by the company due to any reason like the segment is not getting enough profits, it is adding more cost to the company, etc. To compute: The total amount of after-tax income associated with the discontinued segment. After-tax income associated with the discontinued segment = $11025 Particulars Amount ($) Loss from operating a discontinued segment 18250 − ( 18250 × 30 100 ) = 18250 − 5475 = ( 12775 ) Gain on sale of discontinued segment 34000 − ( 34000 × 30 100 ) = 34000 − 10200 = 23800 Income from discontinued segment 23800 − 12775 = 11025 4 Introduction: The net income is the difference of total income and total expenditure in a year. To compute: The amount of net income for the year. Net income = $257425 Particulars Amount ($) Income from continuing operations 232400 Total income from discontinued operations after tax 11025 Gain on insurance recovery of tornado damage 20000 − ( 20000 × 30 100 ) = 14000 Net income 257425

Solution Summary: The author explains the tax effects and after-tax amounts of the three items labeled pretax.

Financial Accounting: Information for Decisions

Financial Accounting: Information for Decisions

8th Edition

ISBN: 9781259533006

Author: John J Wild

Publisher: McGraw-Hill Education

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Financial Accounting: Information for Decisions

Ch. 13 - Explain the difference between financial reporting...Ch. 13 - Prob. 2DQ Ch. 13 - Prob. 3DQ Ch. 13 - Prob. 4DQ Ch. 13 - Prob. 5DQ Ch. 13 - Prob. 6DQ Ch. 13 - Prob. 7DQ Ch. 13 - Prob. 8DQ Ch. 13 - Prob. 9DQ Ch. 13 - Prob. 10DQ

Ch. 13 - Prob. 11DQ Ch. 13 - Prob. 12DQ Ch. 13 - Prob. 13DQ Ch. 13 - Prob. 14DQ Ch. 13 - Prob. 15DQ Ch. 13 - Prob. 16DQ Ch. 13 - Prob. 17DQ Ch. 13 - Financial reporting Cl. Which of the following...Ch. 13 - Prob. 2QS Ch. 13 - Prob. 3QS Ch. 13 - Prob. 4QS Ch. 13 - Prob. 5QS Ch. 13 - Prob. 6QS Ch. 13 - Prob. 7QS Ch. 13 - Prob. 8QS Ch. 13 - Prob. 9QS Ch. 13 - Prob. 1E Ch. 13 - Prob. 2E Ch. 13 - Prob. 3E Ch. 13 - Prob. 4E Ch. 13 - Prob. 5E Ch. 13 - Prob. 6E Ch. 13 - Prob. 7E Ch. 13 - Prob. 8E Ch. 13 - Risk and capital structure analysis P3 Refer to...Ch. 13 - Prob. 10E Ch. 13 - Prob. 11E Ch. 13 - Prob. 12E Ch. 13 - Prob. 14E Ch. 13 - Prob. 15E Ch. 13 - Prob. 1PSA Ch. 13 - Prob. 2PSA Ch. 13 - Prob. 3PSA Ch. 13 - Prob. 4PSA Ch. 13 - Prob. 5PSA Ch. 13 - Prob. 6PSA Ch. 13 - Prob. 1PSB Ch. 13 - Prob. 2PSB Ch. 13 - Prob. 3PSB Ch. 13 - Prob. 4PSB Ch. 13 - Prob. 5PSB Ch. 13 - Prob. 6PSB Ch. 13 - Prob. 13SP Ch. 13 - Prob. 1BTN Ch. 13 - Prob. 2BTN Ch. 13 - Prob. 3BTN Ch. 13 - Prob. 7BTN Ch. 13 - Prob. 9BTN

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