Question

The following is a partial year-end adjusted trial balance. Account Title Debits Credits Sales revenue $ 460,000 Loss on sale of investments $ 54,000 Interest revenue 6,500 Cost of goods sold 240,000 General and administrative expense 56,000 Restructuring costs 58,000 Selling expense 33,000 Income tax expense ? Income tax expense has not yet been recorded. The income tax rate is 25%. a. Determine the operating income (loss). b. Determine the income (loss) before income taxes.

Answer 1

Answer:

a) Operating Income = $73,000

b) Net income before income tax = $25,500

Explanation:

First part of the question is to determine the operating income or loss of the business

It is calculated as follows

Particulars                                          Amount

Sales Revenue                                  $460,000

Subtract: Cost of goods sold           ($240,000)

General and Administrative exp.       ($56,000)

Restructuring Costs                             ($58,000)

Selling Expenses                                  ($33,000)

Operating Income                             $73,000

Second part is to determine the income or loss before income taxes

Particulars                                            Amount

Operating Income                                 $73,000

Add: Interest Revenue                         $6,500

Deduct:Loss on sales of investment  ($54,000)

Income before Income Tax                  $25,500

Finally, the Net Income or loss after Income tax

$25,500 x .25 = $6,375