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    Income from operations and net income

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    Selected information taken from the financial statements of Fordstar Co. for the year ended December 31, 2010, follows:

    Net cash provided by operations...$98,000
    Cost of goods sold.........................$310,000
    Selling, general, and administrative expenses...$124,000
    Accounts Payable....$90,000
    Extraordinary loss from hurricane, net of tax savings of $36,000....$136,000
    Research and development expenses.....30,000
    Net loss from discontinued operations, net of tax savings of $24,000...60,000
    Provision for income taxes....78,000
    net sales.....840,000
    interest expense.....64,000

    A) Calculate income from operations (operating income) for the year ended December 31, 2010.
    B) Calculate net income for the year ended December 31, 2010.

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    Solution Preview

    A) The operating income is calculated as
    Income Statement
    For the year ending Dec 31, 2010
    Net sales 840,000
    Cost of goods sold (310,000)
    Gross profit 530,000
    Selling, general ...

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    The solution explains the calculation of income from operations and net income

    $2.19

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