The following financial information was summarized from the accounting records of Globe Corporation for the current year ended December 31: $$\begin{array} { l r r r }
& \text { Northern } & \text { Southern } & \text { Corporate } \
& \text { Division } & \text { Division } & \text { Total } \
\text { Cost of goods sold } & \$ 310,000 & \$ 175,000 & \
\text { Direct operating expenses } & 250,000 & 115,000 & \
\text { Net sales } & 600,000 & 410,000 & \
\text { Interest expense } & & & \$ 12,000 \
\text { General overhead } & && 101,000 \
\text { Income tax } & && 26,700
\end{array}$$ ? The net income for Globe Corporation is:
A) $59,000.
B) $160,000.
C) $19,400.
D) $47,000.

Question

The following financial information was summarized from the accounting records of Globe Corporation for the current year ended December 31: $$\begin{array} { l r r r } 
& \text { Northern } & \text { Southern } & \text { Corporate } \
& \text { Division } & \text { Division } & \text { Total } \
\text { Cost of goods sold } & \$ 310,000 & \$ 175,000 & \
\text { Direct operating expenses } & 250,000 & 115,000 & \
\text { Net sales } & 600,000 & 410,000 & \
\text { Interest expense } & & & \$ 12,000 \
\text { General overhead } & && 101,000 \
\text { Income tax } & && 26,700
\end{array}$$ ? The net income for Globe Corporation is:
A) $59,000.
B) $160,000.
C) $19,400.
D) $47,000.

Quizplus · Accepted Answer

To calculate the net income for Globe Corporation, first, we need to sum up the total figures for cost of goods sold, direct operating expenses, and net sales across both divisions. Then, subtract the total cost of goods sold, total direct operating expenses, interest expense, general overhead, and income tax from the total net sales.Total Cost of Goods Sold = $310,000 (Northern) + $175,000 (Southern) = $485,000Total Direct Operating Expenses = $250,000 (Northern) + $115,000 (Southern) = $365,000Total Net Sales = $600,000 (Northern) + $410,000 (Southern) = $1,010,000Total Expenses = $485,000 (Cost of Goods Sold) + $365,000 (Direct Operating Expenses) + $12,000 (Interest Expense) + $101,000 (General Overhead) = $963,000Net Income before Income Tax = $1,010,000 (Total Net Sales) - $963,000 (Total Expenses) = $47,000Net Income after Income Tax = $47,000 - $26,700 (Income Tax) = $20,300However, since $20,300 is not an option and there seems to be a mistake in my calculation, let's correct the approach based on the options provided:Correct Calculation:Total Expenses (excluding Income Tax) = $485,000 + $365,000 + $12,000 + $101,000 = $963,000Net Operating Income = $1,010,000 - $963,000 = $47,000Net Income = Net Operating Income - Income Tax = $47,000 - $26,700 = $20,300Given the discrepancy in my initial explanation and the final answer not matching any of the options, it appears there was a miscalculation. The correct approach to find the net income involves subtracting all expenses, including the income tax, from the total net sales. The options provided do not match the recalculated outcome, indicating a need to reassess the calculation based on the provided options and the correct methodology for calculating net income. Given this, the correct choice should be based on the calculation of total net sales minus total costs and expenses (including interest expense, general overhead, and income tax). The error in the explanation was in the final step of calculation, not aligning with the provided options correctly. The correct net income calculation should directly follow from the provided financial information, taking into account all expenses and the income tax.

The Following Financial Information Was Summarized from the Accounting Records