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# Calculate income statement amounts for Tiger Company

Presented below is information related to Tiger Company

Retained earnings 12/31/06 650,000
Sales 1,600,000
hurricane loss (pre-tax) on plant (extraordinary item) 250,000
cash dividends declared on common stock 33,600
Cost of goods sold 1,000,000
Gain resulting from computation error on depreciation charge in 2005 (pre-tax) 520,000
Other revenue 60,000
other expenses 50,000

Instructions:

Complete the items below for the year 2007. Assume a 30% tax rate and that 100,000 shares of common stock were outstanding during the year.

gross profit
income from operations
income taxes
extraordinary items
net income

#### Solution Preview

Gross profit is defined as sales minus cost of goods sold: 1,600,000 - 1,000,000 = 600,000

Income from operations is defined as revenue minus operating expenses: 1,600,000 - (240,000 + 1,000,000) = 360,000

Income tax is computed on "Income before taxes and extraordinary items": (360,000 + 60,000 - 50,000) x 30% = 111,000

Extraordinary item is reported as 250,000 less applicable income tax savings: 250,000 - 30% = 175,000

Net income is 360,000 + 60,000 - 50,000 - 111,000 - 175,000 = 84,000

Note 1: Extraordinary items are ...

#### Solution Summary

Income Statement for Tiger Company: Calculate amounts for gross profit, income from operations, income tax, extraordinary items and net income. The solution shows all the amounts to arrive at the solution including explanations as required.

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