Pear Co.’s income statement for the year ended December 31, 2006, as prepared by Pear’s controller, reported income before taxes of $125,000. The auditor questioned the following amounts that had been included in income before taxes:
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|
Unrealized gain on available-for-sale investment |
$40,000 |
|
Equity in earnings of Cinn Co. |
20,000 |
|
Dividends received from Cinn |
8,000 |
|
Adjustments to profits of prior years for arithmetical errors in depreciation |
(35,000) |
Pear owns 40% of Cinn’s common stock. Pear’s December 31, 2006 income statement should report income before taxes of
- $ 85,000
- $117,000
- $112,000
- $152,000