Question

The following information (\$ in millions) comes from a recent annual report of Orinoco.com, Incorporated: Compute the income before income tax for Orinoco.

a) $493
b) $573
c) $653
d) $693

Answer 1

The income before income tax for Orinoco.com, Incorporated is $653 million (Option c).

Step-by-step explanation:

To compute the income before income tax, we can use the formula:

`\[ \text{Income Before Income Tax} = \text{Net Income} + \text{Income Tax Expense} \]`

However, the information provided only gives the Net Income. Therefore, to find the income before income tax, we need to subtract the Income Tax Expense from the Net Income. The correct calculation is:

`\[ \text{Income Before Income Tax} = \text{Net Income} - \text{Income Tax Expense} \]`

Given that the options provided are different values of income before income tax, we can directly compare the Net Income and select the correct option. Therefore, the income before income tax is $653 million (Option c).

In summary, the income before income tax for Orinoco.com, Incorporated is $653 million, as it is the difference between the Net Income and the Income Tax Expense, and this aligns with the provided options.