During 2014, Liselotte Company earned income of $1,500,000 before income taxes and realized a gain of $450,000 on a government-forced condemnation sale of a division plant facility. The income is subject to income taxation at the rate of 34%. The gain on the sale of the plant is taxed at 30%. Proper accounting suggests that the unusual gain be reported as an extraordinary item. Illustrate an appropriate presentation of these items in the income statement.
Accounting Notes 8/25/16 Basics of Financial Accounting Assets = Liabilities + Owner’s Equity Assets: Things you own (Property, Land, Equipment) Intangible Assets: franchises, trademarks, patents, copyrights, etc. – will go over this later on. Accounts receivable: money owed to us by customers Cash – critical; most liquid asset Inventory Prepaid expenses IN accounting – employees are liabilities and expenditures Assets are listed in order of liquidity; how fast you convert them to cash. In order of liquidity: 1. Cash 2. Accounts Receivable 3. Prepaid exp. 4. Inventory ( 5. Equipement 6. Buildings 7. Land Current asset – used up within a year or cycle Liabilities – things we owe 1. Payroll (wages or salaries) payable 2. Notes