Asked by Brooke Patterson on May 25, 2024
Verified
The Callie Company has provided the following information: Operating expenses were $231,000;
Cost of goods sold was $376,000;
Net sales were $940,000;
Interest expense was $32,000;
Gain on sale of a building was $76,000;
Income tax expense was $151,000.
What was Callie's income before taxes?
A) $564,000.
B) $188,000.
C) $377,000.
D) $232,000.
Income Before Taxes
Earnings of a company before income tax expense is deducted, indicating its profitability from operations.
Operating Expenses
Costs associated with running a company’s day-to-day operations, such as salaries, rent, and utilities, but not including cost of goods sold.
Cost of Goods Sold
The immediate financial outlays associated with the creation of a company's sold products.
- Distinguish between the income derived from operational activities and that which comes from non-operational sources (expenses), and understand the calculation methodologies for both.
Verified Answer
Income before taxes = Net sales - Operating expenses - Cost of goods sold - Interest expense + Gain on sale of building - Income tax expense
= $940,000 - $231,000 - $376,000 - $32,000 + $76,000 - $151,000
= $226,000
Therefore, the correct answer is C) $377,000.
Learning Objectives
- Distinguish between the income derived from operational activities and that which comes from non-operational sources (expenses), and understand the calculation methodologies for both.
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