Purpose: (L.O. 5, 6) This exercise will enable you practice identifying the proper classification for items on an income statement. It will also give you an example of how the tax effects of various items are reflected in the income statement.
Eliason Inc. reported income from continuing operations before income taxes for 2014 of $700,000. The income tax rate on all items was 30%. Additional transactions occurring in 2014 but not considered in the $700,000 are as follows:
Prepare a part of the income statement for the year 2014 starting with “Income before income taxes.”