Question

Desert Company reports the following Income Statement accounts on its Trial Balance for the year ended December 31, 2020: Sales Revenue $280,000 Cost of Goods Sold 170,000 Administrative Expenses 20,000 Loss on Disposal of Equipment 8,000 Sales Commission Expense 12,000 Interest Revenue 7,000 Loss from Discontinued Operations 32,000 Bad Debt Expense 4,000 What should Desert report for Income from Continuing Operations before Income Taxes on its 2020 Income Statement?

a. $73,000
b. $41,000
c. $81,000
d. $66,000

Answer 1

a. $73,000

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

Desert company income statement

Particular Amount ($)

Total Revenue (sales revenue + interest revenue) 287,000

Total expenses excluding loss from discontinuing operation

($246,000 - 32,000) -214,000

Income from continuing operations before income tax 73,000

Working notes:

Total Revenue =Sales Revenue + Interest Revenue

= $280,000 + $7,000

= $287,000

Total Expenses = Cost of Goods Sold + Administrative Expenses + Loss on Disposal of Equipment + Sales Commission Expense + Loss From Discontinued Operations + Bad-Debt Expense

= $170,000 + $20,000 + $8,000 + $12,000 + $32,000 + $4,000

= $246,000