5. Assume that Z company's chief financial officer gave you the following information: net
sales, \$3,800,000; cost of goods sold, \$2,100,000; extraordinary gain (net of income taxes
of of \$7,000), \$25,000; loss from discontinued operations (net of income tax benefit of
\$60,000), \$100,000; loss on disposal of discontinued operations (net of income tax benefit
of \$26,000), \$70,000; selling expenses \$100,000; administrative expenses, \$80,000; income
taxes expense on continuing operations, \$600,000. From this information, prepare the
company's income statement for the year ended December 30,2006.

8 months ago

## To prepare the income statement for Z Company for the year ended December 30, 2006, you need to follow the basic format of an income statement which includes revenue, expenses, gains, and losses.

Step 1: Calculate the Gross Profit
Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = \$3,800,000 - \$2,100,000

Step 2: Calculate the Operating Income
Operating Income = Gross Profit - Selling Expenses - Administrative Expenses
Operating Income = Gross Profit - \$100,000 - \$80,000

Step 3: Calculate the Income Before Taxes
Income Before Taxes = Operating Income + Extraordinary Gain - Loss from Discontinued Operations - Loss on Disposal of Discontinued Operations
Income Before Taxes = Operating Income + \$25,000 - \$100,000 - \$70,000

Step 4: Calculate the Net Income
Net Income = Income Before Taxes - Income Taxes Expense on Continuing Operations - Income Tax Benefit from Discontinued Operations
Net Income = Income Before Taxes - \$600,000 - \$60,000 - \$26,000

Now, let's put all the calculated values into the income statement:

Z Company Income Statement for the Year Ended December 30, 2006

Net Sales: \$3,800,000
Cost of Goods Sold: \$2,100,000
Gross Profit: [calculated in Step 1]

Selling Expenses: \$100,000
Operating Income: [calculated in Step 2]

Extraordinary Gain: \$25,000
Loss from Discontinued Operations: \$100,000
Loss on Disposal of Discontinued Operations: \$70,000
Income Before Taxes: [calculated in Step 3]

Income Taxes Expense on Continuing Operations: \$600,000
Income Tax Benefit from Discontinued Operations: \$60,000
Income Tax Benefit from Loss on Disposal of Discontinued Operations: \$26,000
Net Income: [calculated in Step 4]

Note: Make sure to replace the [calculated in Step X] placeholders with the actual calculated values from the previous steps.

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