Chapter 5, Problem 5.5MC

Allison Corporation’s current year income from continuing operations before taxes was $1,000,000 before taking the following items into consideration:

• Depreciation was understated by $100,000.
• A strike by the employees of a supplier resulted in a loss of $200,000. This strike was the first such strike that Allison had encountered.
• The inventory at December 31 of the prior year was overstated by $300,000 The inventory at December 31 of the current year was correct.
• A food in Allison’s Houston facility destroyed equipment worth $500,000 The facility had just been rebuilt from damages that occurred in a flood in the prior year.

What was Allison's adjusted income from containing operations before taxes?

1. a. $1,000 003
2. b. $030,000
3. c. $700,000
4. d. $500,000