The following question is based on the following:
Vane Co.'s trial balance of income statement accounts for the year ended December 31, Year 1, included the following:
Debit Credit
Sales $ 575,000
Cost of sales $ 240,000
Administrative expenses 70,000
Loss on sale of equipment 10,000
Sales commissions 50,000
Interest revenue 25,000
Freight out 15,000
Loss on early retirement of long-term debt 20,000
Uncollectible accounts expense 15,000
Total $ 420,000 $ 600,000
Other information
Finished goods inventory:
January 1, Year 1 $400,000
December 31, Year 1 $360,000
Vane's income tax rate is 30%.
In Vane's Year 1 multiple-step income statement, what amount should Vane report as income from continuing operations?
a.$140,000
b.$126,000
c.$133,000
d.$115,500
Explanation
Choice “b” is correct: $126,000.
Net of credits over debits ($600,000 − 420,000) = $ 180,000
Income from continuing operations = 180,000
“Net of tax” rate (100% − 30% tax) × 70%
Income after income taxes from continuing operations = $ 126,000
Don't understand his explanation at all
BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS
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