At the Beginning of 2014, Jeffrey Company Disposed of a Segment

question 98

Essay

At the beginning of 2014, Jeffrey Company disposed of a segment of its business and incurred a pre-tax loss of $40,000 on the disposal, which resulted in an after-tax loss on disposal of $32,000. In the same year, a flood caused $15,000 of damages to the building. The flood damage qualified as an extraordinary item. The resulting extraordinary loss net of tax was $12,000. Income from continuing operations before taxes was $100,000 for 2014 and a 20% tax rate applied to all of the items above. Prepare a partial income statement starting with income from continuing operations before taxes for the year ending 2014 and concluding with net income.

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Definitions:

Maturity Date

The specified date on which the final payment of a loan or financial instrument must be paid, at which point the principal (and all remaining interest) is due to be paid.

Leap Years

Years with 366 days, occurring every four years, to keep the calendar year synchronized with the astronomical year.

Surety Financing Company

A surety financing company provides financial guarantees for obligations made by the principal, ensuring contract completion in the event of default.

Discounted

A reduction applied to the regular price of products or services, often used as an incentive for customers.