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% 3 £400,000)                                              120,000
Income before discontinued operations                                             430,000
Loss on discontinued division                                                            150,000
Net income                                                                                      £280,000
The loss on discontinued division consists of £60,000 loss from operations of the division and £90,000 loss on disposal of the division. 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.