Question

The next 5 questions use the same below information. Company C had the following investment. Help them determine the financial statement implications of the investment. Tax rate 21% Estimated tax payment 21,000 Investment cost and ending fair values for 20X1 and 20X2: 20X1 20X2 Cost 100,000 100,000 Fair value 110,000 134,000 Total gain 10,000 34,000 20X1 income statement information: Sales 1,670,200 Expenses 1,536,600 What is net income for 20X1 assuming the investment is short-term?

Answer 1

The net income for Company C in 20X1, assuming the investment is short-term, is $143,600, calculated by adding the total gain from the investment of $10,000 to the income from operations of $133,600.

Step-by-step explanation:

To calculate the net income for Company C in 20X1 assuming the investment is short-term, we will start by adding the total gain from the investment to the company's income from its operations. According to the provided information, the company has a total gain of $10,000 from the investment. Since the investment is short-term, the gain is recognized on the income statement.

Next, we calculate the income from operations by subtracting expenses from sales. Based on the provided data:

• Sales: $1,670,200
• Expenses: $1,536,600

Income from operations = Sales - Expenses = $1,670,200 - $1,536,600 = $133,600.

Now we add the gain from the investment to the income from operations to find the net income:

Net income = Income from operations + Gain from investment = $133,600 + $10,000 = $143,600.

Answer 2

$143,600

Step-by-step explanation:

Calculation for What is net income for 20X1 assuming the investment is short-term

Using this formula

Net income for 20X1 = Sales – Expenses + Unrealized gain on short-term investments

Let plug in the formula

Net income for 20X1 = $1,670,200 - $1,536,600 + $10,000

Net income for 20X1= $143,600

Therefore the net income for 20X1 assuming the investment is short-term will be $143,600