Connect 2-Semester Access Card for Fundamental Accounting Principles
Connect 2-Semester Access Card for Fundamental Accounting Principles
22nd Edition
ISBN: 9780077632755
Author: John Wild
Publisher: McGraw-Hill Education
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Chapter 17, Problem 6APSA

Requirement 1

To determine

To Prepare:

The income tax effects and after tax amounts

Requirement 1

Expert Solution
Check Mark

Answer to Problem 6APSA

Solution:

The income tax effects and after tax amounts are given below

    Effect of income taxes (debits or losses is shown in negative amount)
    Particulars
    Pretax
    30% Tax Effect
    After-Tax
    l. Loss from operating a discontinued segment
    -18,250
    -5,475
    -12,775
    j Gain on insurance recovery of tornado damages
    29,120
    8,736
    20,384
    m. Correction of overstatement of prior year’s sale
    -16,000
    -4,800
    -11,200
    n. Gain on sale of discontinued segment’s assets
    34,000
    10,200
    23,800

Explanation of Solution

The following assumptions is taken

  • The tax rate is given 30%
  • The pre tax labeled items have to be calculated for tax effects

The calculation of tax income tax effects and after tax amounts in excel is given below

    Effect of income taxes (debits or losses is shown in negative amount
    Particulars
    Pretax
    30% Tax Effect
    After-Tax

    Amount($)
    Tax rate
    Tax amount
    Amount($)

    A
    B
    C=A x B
    D=A-C
    l. Loss from operating a discontinued segment
    -18,250
    30%
    -5,475
    -12,775
    j Gain on insurance recovery of tornado damages
    29,120
    30%
    8,736
    20,384
    m. Correction of overstatement of prior year’s sale
    -16,000
    30%
    -4,800
    -11,200
    n. Gain on sale of discontinued segment’s assets
    34,000
    30%
    10,200
    23,800

Conclusion:

The total income tax effect is $8,661 and total income post tax amount is $20,209

Conclusion

There is Income from discontinued segment of $11,025 for the year 2015

Requirement 2

To determine

To Prepare:

The Net income from continuing operations before and after tax expense

Requirement 2

Expert Solution
Check Mark

Answer to Problem 6APSA

Solution:

The Net income from continuing operations before and after tax expense is given below

    Olinda corporation
    Income statement ($)
    For the year ended December 31,2015
     
     
     
     
    k.
    Net sales
     
    998,500
    a
    Interest revenue
     
    14,000
    g.
    Gain from settling lawsuit
     
    44,000
     
    Total revenues and gains
     
    1,056,500
    q
    Cost of goods sold
    482,500
     
    b
    Depreciation expense—Equipment
    34,000
     
    i.
    Depreciation expense—Buildings
    52,000
     
    e
    Other operating expenses
    106,400
     
    c
    Loss on sale of equipment
    25,850
     
    o
    Loss from settling lawsuit
    23,750
     
     
    Total expenses and losses
     
    724,500
     
    Income from continuing operations before taxes
     
    332,000
    p
    Income taxes expense (30%)
     
    99,600
     
    Income from continuing operations after taxes
     
    232,400

Explanation of Solution

Only those items which impact the income statement are taken the revenue and expanses of continuing operations are. The income from continuing operations are calculated as below

  • The total revenues and gains are first calculated which includes net sales , interest revenue and gain from settling law suit
  • Next the total expenses and losses related to continuing operations is calculated
  • The income from continuing operations before income tax is calculated by following equation

  •   Income from continuing operations before tax = Total revenue and gains - total expenses and lossesIncome from continuing operations before tax = $1,056,500 - $724,500Income from continuing operations before tax =  $  332,000

  • The income tax rate is given 30%. the income tax expenses is calculated below
  • Income tax expense = income from continuing operations before income tax x income tax rateIncome tax expense = $ 332,000 x 30%Income tax expense = $ 99,600

  • The income from continuing operations is calculated below
  • Income from continuing operations = income from continuing operations before income tax - Income tax expenseIncome from continuing operations = $ 332,000$ 99,600Income from continuing operations = $ 232,400

Conclusion:

The income from continuing operations before income tax is $ 332,000, the income tax expense is $ 99,600 and income from continuing operations is $232,400

Conclusion

There is Income from discontinued segment of $11,025 for the year 2015

Requirement 2

To determine

To Prepare:

The Net income from continuing operations before and after tax expense

Requirement 2

Expert Solution
Check Mark

Answer to Problem 6APSA

Solution:

The Net income from continuing operations before and after tax expense is given below

    Olinda corporation
    Income statement ($)
    For the year ended December 31,2015
     
     
     
     
    k.
    Net sales
     
    998,500
    a
    Interest revenue
     
    14,000
    g.
    Gain from settling lawsuit
     
    44,000
     
    Total revenues and gains
     
    1,056,500
    q
    Cost of goods sold
    482,500
     
    b
    Depreciation expense—Equipment
    34,000
     
    i.
    Depreciation expense—Buildings
    52,000
     
    e
    Other operating expenses
    106,400
     
    c
    Loss on sale of equipment
    25,850
     
    o
    Loss from settling lawsuit
    23,750
     
     
    Total expenses and losses
     
    724,500
     
    Income from continuing operations before taxes
     
    332,000
    p
    Income taxes expense (30%)
     
    99,600
     
    Income from continuing operations after taxes
     
    232,400

Explanation of Solution

Only those items which impact the income statement are taken the revenue and expanses of continuing operations are. The income from continuing operations are calculated as below

  • The total revenues and gains are first calculated which includes net sales , interest revenue and gain from settling law suit
  • Next the total expenses and losses related to continuing operations is calculated
  • The income from continuing operations before income tax is calculated by following equation

  •   Income from continuing operations before tax = Total revenue and gains - total expenses and lossesIncome from continuing operations before tax = $1,056,500 - $724,500Income from continuing operations before tax =  $  332,000

  • The income tax rate is given 30%. the income tax expenses is calculated below
  • Income tax expense = income from continuing operations before income tax x income tax rateIncome tax expense = $ 332,000 x 30%Income tax expense = $ 99,600

  • The income from continuing operations is calculated below
  • Income from continuing operations = income from continuing operations before income tax - Income tax expenseIncome from continuing operations = $ 332,000$ 99,600Income from continuing operations = $ 232,400

Conclusion:

The income from continuing operations before income tax is $ 332,000, the income tax expense is $ 99,600 and income from continuing operations is $232,400

Requirement 3

To determine

To Prepare:

The after income tax income (loss) from discontinued segment

Requirement 3

Expert Solution
Check Mark

Answer to Problem 6APSA

Solution:

The after income tax income (loss) from discontinued segment is given below

    After tax income from discontinued segment (debits or losses is shown in negative amount
    Particulars
    Amount($)
    l. Loss from operating a discontinued segment (after Tax)
    -12,775
    n. Gain on sale of discontinued segment’s assets (after tax)
    23,800
    Income from discontinued segment
    11,025

Explanation of Solution

The items which will be taken for calculating income after income tax income (loss) from discontinued segment are only related to discontinued segment which is given below

  • Loss from operating a discontinued segment (After Tax) is $12,775 calculated in requirement 1
  • Gain on sale of discontinued segment’s assets (after tax) is $23,800 calculated in requirement 1

The total of both items above will show the Income from discontinued segment

Conclusion

There is Income from discontinued segment of $11,025 for the year 2015

Requirement 4

To determine

To Prepare:

Income before extraordinary items

Requirement 4

Expert Solution
Check Mark

Answer to Problem 6APSA

Solution:

The income before extraordinary items is calculated below

    Income before extraordinary items (losses is shown in negative amount)
    Particulars
    Amount($)
    Income from continuing operations after taxes
    232,400
    Income from discontinued segment
    11,025
    Income before extraordinary items
    243,425

Explanation of Solution

The items which will be taken for calculating income before extraordinary items which is given below

  • Income from continuing operations after taxes is $232,400 calculated in requirement 2

  • Income from discontinued segment is $11,025 calculated in requirement 3

The total of both items above will show the income before extraordinary items

Conclusion

There is income before extraordinary items of $243,425 for the year 2015

Requirement 5

To determine

To Prepare:

Net income for the year 2015

Requirement 5

Expert Solution
Check Mark

Answer to Problem 6APSA

Solution:

The Net income is as under

    Net income (losses is shown in negative amount)
    Particulars
    Amount($)
    Income before extraordinary items
    243,425
    Extra ordinary item
     
    j Gain on insurance recovery of tornado damages (after tax)
    20,384
    Net income
    263,809

Explanation of Solution

The items which will be taken for Net income which is given below

  • Income before extraordinary items is $243,425 calculated in requirement 4
  • Gain on insurance recovery of tornado damages (after tax)is $20,384 calculated in requirement 1

The total of both items above will show the Net income

Conclusion

The Net income is $263,809 for the year 2015

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Chapter 17 Solutions

Connect 2-Semester Access Card for Fundamental Accounting Principles

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