If capital assets of a manufacturing company are sold at a gain of $820,000 less related taxes of $250,000,and the gain is not considered unusual or infrequent,the income statement for the period would disclose the effect if this sale as:

Question

Quizplus · Accepted Answer

The gain of $820,000 less related taxes of $250,000 would result in a net gain of $570,000. Since the gain is not considered unusual or infrequent, it would be reported as a part of regular operating activities and would result in an increase in income tax expense. Therefore, the income statement would show a gain of $820,000 and an increase in income tax expense of $250,000, resulting in a net gain of $570,000.

If Capital Assets of a Manufacturing Company Are Sold at a Gain