1.
Potter Corporation has income from continuing operations of $290,000 for the year ended
December 31, 2012. It also has the following items (before considering income taxes).
1. An extraordinary loss of $80,000.
2. A gain of $30,000 on the discontinuance of a division.
3. A correction of an error in last year
Solution
Income Statement For the Year Ended December 31,2012
last Year correction will not appear in the current year Income Statement.
Amount($) Amount($)
Income From Continuing Operation 290,000
Less: Tax (30%) 87,000
Net Income from Operation 203,000
Extra Ordinary Loss (80,000)
Less: Tax Advantage 27,000
Net Loss from Operation (53,000)
Gain on Discontinuance of Division 30,000
Less: Tax 10,500
Net Gain on Discontinuance of Division 19,500
Net Income 169,500