Pearson Company reported net income of $450,000.This amount included a pre-tax loss of $15,000 that was considered material and pertained to its continuing operations.Assuming an income tax rate of 35%, Pearson's net income without this loss would have been
A)$444,750
B)$435,000
C)$440,250
D)$410,250

Question

Quizplus · Accepted Answer

To find Pearson's net income without the pre-tax loss, we need to add back the amount of the loss before taxes, which is $15,000. Then, we need to calculate the income tax based on the revised net income.

Net income without loss = $450,000 + $15,000 = $465,000

Income tax = 35% of $465,000 = $162,750

Revised net income = $465,000 - $162,750 = $302,250

Therefore, Pearson's net income without the pre-tax loss would have been $440,250 (choice C).

Pearson Company Reported Net Income of $450,000