Given the Following Information About a Corporation's Current Year Activities

question 33

Essay

Given the following information about a corporation's current year activities, answer the questions below:
$\begin{array}{|l|r|r|}\hline& \underline { \text {Debit } }& \underline { \text {Credit } }\\\hline\text { Sales }&&\$ 250,000\\\hline \text { Cost of goods sold } & \$ 90,000 \\\hline \text { Other operating expenses } & 54,000 \\\hline \begin{array}{l}\text { Income from operation of discontinued Division W (net } \\\text { of } \$ 9,200 \text { tax })\end{array} &&30,800 \\\hline \begin{array}{l}\text { Extraordinary loss from hurricane damage (net of } \\\$ 11,000 \text { tax benefit) }\end{array} & 37,000 \\\hline \begin{array}{l}\text { Loss from disposal of Division W (net of } \$ 15,000 \text { tax } \\\text { benefit) }\end{array} & 45,000 \\\hline \text { Unusual loss on sale of equipment } & 12,000 \\\hline \begin{array}{l}\text { Effect on prior years' income of changing depreciation } \\\text { methods (net of } \$ 4,000 \text { tax) }\end{array} & 13,500 \\\hline\end{array}$ Compute the amounts that should be reported on the income statement as:
(1)Income from continuing operations.
(2)Income before extraordinary items and cumulative effect of changes in accounting principles.
(3)Net income.

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Definitions:

Allowance Method

An accounting technique used to estimate and account for potential uncollectible accounts receivable and bad debts.

Net Realizable Value

The projected selling price of items subtracted by their sales or disposal expenses.

Accounts Receivable

Outstanding payments from customers to a company for goods or services already delivered but not yet compensated for.

Bank Reconciliation

The process of comparing and matching figures from the accounting records against those presented on a bank statement to ensure they are in agreement and accurate.