Allison Corporation’s current year income from continuing operations before taxes was $ 1,000,000 before taking the following items into consideration:
• Depreciation was understated by $ 100,000.
• A strike by the employees of a supplier resulted in a loss of $ 200,000. This strike was the first such strike that Allison had encountered.
• The inventory at December 31 of the prior year was overstated by $ 300,000. The inventory at December 31 of the current year was correct.
• A flood in Allison’s Houston facility destroyed equipment worth $ 500,000. The facility had just been rebuilt from damages that occurred in a flood in the prior year. What was Allison’s adjusted income from continuing operations before taxes?
a. $ 1,000,000
b. $ 900,000
c. $ 700,000
d. $ 500,000