For its fiscal year ending October 31, 2014, Douglas Corporation reports the following partial data shown below.

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For its fiscal year ending October 31, 2014, Douglas Corporation reports the following partial data shown below.
Income before income taxes .........$550,000
Income tax expense (30% × $410,000) ......123,000
Income before extraordinary items ......427,000
Extraordinary loss from flood .......140,000
Net income ..............$287,000
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.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Managerial Accounting Tools for business decision making

ISBN: 978-1118096895

6th Edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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