Geyser Corp

question 4

Essay

Geyser Corp. reported net income of $390,000 in 2007. During 2007 Geyser reported a loss of $72,000 from a peripheral activity. The loss was included as part of income from continuing operations. Assuming that the loss is a one-time event and that Geyser has an effective tax rate of 35% calculate Geyser's adjusted net income. Show all of your calculations for credit.
In addition, discuss why analysts might make an adjustment of this type.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or service activity, such as materials and labor.

Repetitive Focus

A strategy in manufacturing that emphasizes the repeated production of the same products or a narrow range of products efficiently.

Modules

Parts or components of a product previously prepared, often in a continuous process.

Standardized Product

A product that is manufactured in a consistent, unchanged manner to ensure it meets specified criteria and quality.