Question

The following items appeared in the year-end trial balance for the Brown Coffee Company: Debits Credits Revenues $ 600,000 Operating expenses $ 420,000 Income on discontinued operations 200,000 Restructuring costs 100,000 Interest expense 20,000 Gain on sale of investments 30,000 Income tax expense has not yet been accrued. The company's income tax rate is 40%. What amount should be reported in the company's income statement as income from continuing operations?

Answer 1

The amount that should be reported in the company's income statement as income from continuing operations is $54,000

Step-by-step explanation:

ACCOUNT DEBIT CREDIT

Debit Credit Revenues 600,000

Operating Expenses 420,000

Income of Discontinued Operations 200,000

Restructuring Cost 100,000

Interest Expense 20,000

Gain on Sale of Investment 30,000

Income Tax Expense 36,000

TOTAL $576,000 $830,000

NOTE

Taxable Income 830,000 – 200,000 - 540,000 =90,000

Income tax Expense =90,000*0.4 = $36,000 (the company income tax rate is 40%)

The $200, 000 was subtracted from the total income of $830,000 before the income tax expense was calculated since it was income earned from discontinued operation.

Total Income = 830, 000 – 576,000 = $254,000

Income from Continuing Operations = 254,000 – 200,000 (Income from discontinued operations) = $54,000

Therefore the amount that should be reported in the company's income statement as income from continuing operations is $54,000

Answer 2

What amount should be reported in the company's income statement as income from continuing operations?

$54000

Step-by-step explanation:

revenue 600000

Operating expenses -420000

Interest expense -20000

gain on sale of investments 30000

restructuirng cost -100000

Income 90000

Tax rate 40%

tax expense 36000

Net income 54000