Acompany's activities for year two included the following: gross sales $3,600,000 cost of goods sold 1,200,000 selling and administrative expense 500,000 adjustment for a prior-year understatement of amortization expense 59,000 sales returns 34,000 gain on sale of stock portfolio securities 8,000 gain on disposal of a discontinued business segment 4,000 unrealized gain on afs debt portfolio securities 2,000 the company has a 30% effective income tax rate. what is the company's net income for year two?

$1,273,300

Explanation:

The computation of the net income is shown below:

= Gross sales - sales returns - Cost of goods sold - Selling and administrative expense - prior-year understatement of amortization expense + Gain on sale of stock portfolio securities + Gain on disposal of a discontinued business segment - income tax expense

where, income tax expense would be

= ( Gross sales - sales returns - Cost of goods sold - Selling and administrative expense - prior-year understatement of amortization expense + Gain on sale of stock portfolio securities + Gain on disposal of a discontinued business segment) × income tax rate

= ($3,600,000 - $34,000 - $1,200,000 - $500,000 - $59,000 + $8,000 + $4,000) × 30%

= $545,700

So, the net income would be

= $3,600,000 - $34,000 - $1,200,000 - $500,000 - $59,000 + $8,000 + $4,000 - $545,700

= $1,273,300

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