Question

For its fiscal year ending October 31, 2014, Haas Corporation reports the following partial data shown below.
Income before income taxes ............. $540,000
Income tax expense (30% 3 $420,000) ......... 126,000
Income before extraordinary items ........... 414,000
Extraordinary loss from flood ............. 120,000
Net income ..................... $294,000
The flood loss is considered an extraordinary item. The income tax rate is 30% on all items.

Instructions
(a) Prepare a correct income statement, beginning with income before income taxes.
(b) Explain in memo form why the income statement data are misleading.



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  • CreatedJanuary 30, 2014
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