Professional Simulation

In this simulation, you are asked to compute various income amounts. Assume a tax rate of 30% and 100,000 shares of common stock outstanding during the year. Prepare responses to all parts. Jude Law Corporation provides you with the following pretax information for the period.

Sales   revenue

$3,200,000

Cost of   goods sold

1,920,000

Interest   revenue

10,000

Loss   from abandonment of plant assets

40,000

Selling   expenses

340,000

Administrative   expenses

280,000

Cumulative   effect on prior years
  of change from FIFO to average
  cost for inventory costing
  purposes

 

Loss   from earthquake

50,000

Gain on   disposal of a component of

40,000

Jude Law   Corporation’s business

90,000

Explain the proper accounting treatment for loss on abandonment of plant assets, gain on disposal of a component of a business, and change in inventory costing methods. Compute the following five items.

(a) Gross profit.

(b) Income from continuing operations before income tax.

(c) Income from continuing operations.

(d) Net income.

(e) Earnings per share.