Misty Company reported the following before-tax items during the current year:fa

Question

Misty Company reported the following before-tax items during the current year:face="verdana" size="2">

face="verdana" size="2">

Sales                               $600face="verdana" size="2">

Operating expenses        $250face="verdana" size="2">

Restructuring charges     $50face="verdana" size="2">

Misty Company reported the following before-tax items during the current year: Misty's effective tax rate is 40% and there were 1,000 shares of common stock outstanding. What would be Misty's income before extraordinary item(s)?

Explanation / Answer

Hi,

Please find the answer as follows:

Misty's income before extraordinary item = 600 - 250 (Operating Expenses) - 50 (Restructuring Charges) = 300*(1-.40) = 180

Answer is 180.

Notes:

a) Restructuring Charges would be deducted while calculating Misty's income before extraordinary item.

b) Extraordinary Loss will not be deducted.

Thanks.

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