The Stam Corporation reports the following pretax accounting (and taxable) income items during 2007:
Income from continuing operations ..........$90,000a
Loss from operations of a discontinued division ......(10,000)
Gain from the disposal of the discontinued division ....25,000
Extraordinary gain .................20,000
a. Of this amount, revenues are $320,000 and expenses are .$230,000.
Required
1. Prepare the journal entry necessary to record the 2007 intraperiod income tax allocation in regard to the preceding information. Assume a tax rate of 15% on the first $40,000 of income and a rate of 30% on income in excess of $40,000.
2. Prepare Stam’s 2007 income statement.