The Alley Company has income from continuing operations of $490,000 for the year ended December 31, 2007. It also has the following items (before considering income taxes):
(1) An extraordinary fire loss of $120,000.
(2) A gain of $60,000 on the discontinuance of a major segment.
(3) A cumulative effect of a change in accounting principle that resulted in an increase in prior years' depreciation of $50,000.
Assume all items are subject to income taxes at a 30% tax rate.
Instructions
Prepare an income statement, beginning with income from continuing operations.