Jacobsen Corporation prepares its financial statements applying U. S. GAAP. In its 2018 income statement, Jacobsen would report income from continuing operations of

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Jacobson Corporation prepares its financial statement applying US GAAP. During its 2018 fiscal year, the company reported income from continuing operations before tax of $620,000. This amount does not include the following item, which is considered to be material in amount:

Unusual gain of $200,000

Loss on discontinued operations ($300,000)

The company's income tax rate is 40%. In its 2018 income statement.

Jacobson would report income from continuing operations (after tax) of:

A. $312,000.

B. $372,000.

C. $492,000.

D. $620,000.

Option C. $492,000

Explanation:

The Total Operating Income is:

Operating Income From Continuing Operation     $620,000

Unusual Gain                                                           $200,000

Total Income                                                             $820,000

The unusual gain will be included in the operating income as it is related to operating income.

The net income from continuing operation will be net of tax which means that:

Net Income after tax = $820,000 * (1 - 40%) = $492,000

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