High Seas Cruise Lines, Inc., reported the following income statement for the year ended December 31, 2006.
Millions
Operating revenues ........................................................... $70,752
Operating expenses .......................................................... 60,258
Operating income.............................................................. 10,494
Other revenue (expense), net ........................................... 985
Income from continuing operations.................................. 11,479
Discontinued operations, net of tax.................................. 935
Net income........................................................................ $12,414
Required
1. Were High Seas' discontinued operations more like an expense or a revenue? How can you tell?
2. Should the discontinued operations of High Seas be included in or excluded from net income? State your reason.
3. Suppose you are working as a financial analyst and your job is to predict High Seas' net income for 2007 and beyond. Which item from the income statement will you use for your prediction? Identify its amount. Why will you use this item?