Wrapp Company has income before taxes of $350,000 and an extraordinary loss of $70,000. If the income tax rate is 30% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of:
A)$350,000 and ($70,000)
B)$245,000 and ($24,000)
C)$245,000 and ($49,000)
D)$105,000 and ($21,000)

Question

Quizplus · Accepted Answer

To calculate the income before irregular items, we need to subtract the extraordinary loss from the income before taxes:

$350,000 - $70,000 = $280,000

To calculate the income after income tax:

$280,000 * 0.70 (1- 30% tax) = $196,000

Therefore, the income statement should show income before irregular items of $245,000 ($280,000 - 30% tax) and an extraordinary loss of $49,000 ($70,000 * 0.70 tax). The correct option is C.

Wrapp Company Has Income Before Taxes of $350,000 and an Extraordinary