Question

Misty company reported the following before-tax items during the current year:

sales $626
operating expenses 270
restructuring charges 21
unusual loss 38
loss from discontinued operations 67
misty's effective tax rate is 40%.

what is misty's income from continuing operations?

Answer 1

Misty Company's income from continuing operations after tax is calculated by subtracting operating expenses, restructuring charges, and unusual loss from sales, and then applying the effective tax rate of 40%, resulting in $178.2.

Step-by-step explanation:

The student is asking how to calculate Misty Company's income from continuing operations given its before-tax items and the effective tax rate. To figure this out, we start by summing up the sales and then subtracting operating expenses, restructuring charges, and the unusual loss. Specifically, we do not subtract the loss from discontinued operations, since this question asks about continuing operations only. After calculating the sum, we apply the tax rate to obtain the net income from continuing operations.

Here's the calculation:

• Sales: $626
• Operating expenses: -$270
• Restructuring charges: -$21
• Unusual loss: -$38
• Subtotal income from continuing operations before tax: $297
• Tax (40% of $297): -$118.8
• Income from continuing operations after tax: $178.2

Therefore, the income from continuing operations after tax would be $178.2.