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solutions%20ch04%20P4-7

# solutions%20ch04%20P4-7 - Income from continuing operations...

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AIM 3331-0U1 Solutions to suggested assignments Chapter 4 PROBLEM 4-7 Rap Corp. Income Statement (Partial) For the Year Ended December 31, 2007 Income from continuing operations before income tax ................................. \$1,206,000* Income tax ........................................ 458,280 ** Income from continuing operations ....... 747,720 Discontinued operations Loss from operations of discontinued subsidiary ............. \$ 90,000 Less: Applicable income tax reduction ........................ 34,200 \$ 55,800 Loss from disposal of subsidiary .... 100,000 Less: Applicable income tax reduction ........................ 38,000 62,000 117,800 Income before extraordinary item ........... 629,920 Extraordinary item: Gain on condemnation ................... 145,000 Less: Applicable income tax .......... 58,000 87,000 Net income ................................................. \$ 716,920 Per share of common stock:

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Unformatted text preview: Income from continuing operations. ................................. \$7.48* Discontinued operations, net of tax. ................................. (1.18 )* Income before extraordinary item. ..................................... 6.30 Extraordinary item, net of tax. ............................................ .87 Net income (\$716,920 ÷ 100,000). ....................................... \$7.17 1 AIM 3331-0U1 *Rounded PROBLEM 4-7 (Continued) *Computation of income from continuing operations before income tax: As previously stated \$1,210,000 Loss on sale of equipment [\$40,000 – (\$80,000 – \$36,000)] (4,000 ) Restated \$1,206,000 **Computation of income tax expense: \$1,206,000 X .38 = \$458,280 Note: The error related to the intangible asset was correctly charged to retained earnings. 2...
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solutions%20ch04%20P4-7 - Income from continuing operations...

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