Question

A company showed the following data relating to its year-end activity:

• Net sales for the year totaled $465,000.

• Cost of goods sold for the year totaled $239,000.

• Regular operating expenses for the year were $113,200.

• Interest expense for the year was $11,000.

• In July, the company sold a major segment of its business at a gain of $50,000 before

  any tax effects. This segment of the company represented a major line of business that

  was totally separate from the rest of the operation.

• Prior to being sold, the business segment had Year-to-date sales of $60,000, cost of

  goods sold of $40,000, and operating expenses of $35,000. These amounts are not

  included in the previous information provided.

• The company’s income tax rate is 30% of all items.

  Required: Prepare the company’s income statement for this year, using the multiple-step format.

Answer 1

INCOME STATEMENT
Sales		465000
Less:cost of sales		(239000)
Gross margin		226000
Less:Operating expenses		(113200)
Operating income		112800
other income /(expenses)
Interest expense		(11000)
Income from continuing operations before tax		101800
less:Income tax expense (101800*30%)		(30540)
Income from continuing operations		71260
Discontinued operations
Gain on disposal ,net of tax [50000(1-.30)]	35000
Loss from operations of discontinued operations ,net of tax savings [-15000(1-.30)]	- 10500
Income from discontinued operations		24500
net income		95760

Note :

Income /(loss )from operations of discontinued operations = 60000-40000-35000 = -15000