Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 85

Calculate income from operations and net income Selected information taken

from the financial statements of Verbeke Co. for the year ended December 31, 2010,

follows:

Gross profit	$412,000
General and administrative expenses	83,000
Net cash used by investing activities	106,000
Dividends paid	51,000
Extraordinary loss from an earthquake, net of tax savings of $25,000	61,000
Net sales	741,000
Advertising expense	76,000
Accounts payable	101,000
Income tax expense	83,000
Other selling expenses	42,000

a. Calculate income from operations (operating income) for the year ended December 31, 2010. (Hint: You may wish to review Exhibit 2-2.)

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b. Calculate net income for the year ended December 31, 2010.

Step 1 of 6

Income from Operations:

Income from operations represents one of the most measures of performance of business activities. Income from operations is related to the assets available to the firm. It refers to the amount of income realized from business direct operations.