Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below.j Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31, 2017, follow Debit Credit $14,800 a. Interest revenue b. Depreciation expense-Equipment c. Loss on sale of equipment d. Accounts payable e. Other operating expenses f. ACCumulated depreciation Equipment g. Gain from settlement of lawsuit h. Accumulated depreciation-Buildings i. Loss from operating a discontinued segment (pretax) j. Gain on insurance recovery of tornado damage k. Net sales 1. Depreciation expense-Buildings m. Correction of overstatement of prior year's sales (pretax) n. Gain on sale of discontinued segment's assets (pretax) o. Loss from settlement of lawsuit p. Income taxes expense q. Cost of goods sold 34, 800 26,650 44,800 107,200 72,400 44,800 176,100 19,050 29,920 1,006,500 52,800 16,800 24, 550 490, 500 38,000

Explanation / Answer

We can solve this question with the help of Income Statement.

Olinda Corporation Income Statement Particulars Amount in $ Sale 1006500 Less : Cost of goods sold -490500 Gross Profit (A) 516000 Operating Expenses Depreciation Expenses 87600 Loss on Sale of Equipment 26650 Loss From Lawsuit 24550 Other Operating Expenses 107200 Total Operating Expenses 246000 Operating Profit (A-B) 270000 Other than Operating Revenue Add :Interest Revenue 14800 Income From Continuing Operations Before tax 284800 Less : Income Tax @35% 99680 Income From Continuing Operations 185120 Discontinued Operations Gain on sale of discontinued Assets 38000 Loss from operating a discontinued segment -19050 18950 Less : Income tax @35% -6632.5 After tax Income from discontinued Segment 12317.5 Income Before Extraordinary Income 197437.5 Add : Extraordinary income Gain from Lawsuit (Net of Taxes) 29120 Gain from Insurance Recovery (Net of Taxes) 19448 Net Income of the year 246005.5 A. After tax Income from discontinued Segment 12317.5 B. Net Income 246005.5 Assumption 1- Due to Missing Data of Tax Rate ,it is assumed tax that Tax rate was 35% . 2-it is assumed the loss from lawsuit is part of Operating expenses. Otherwise, it can be claimed in extraordinary items. 3-Correction of overstatement of Prior year sales can be adjusted in retained earnings instead of Income statement. 4- Gain from lawsuit and gain from insurance recovery is part of extraordinary items.

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