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

Exercise 87

Calculate income from operations and net income Selected information taken from the financial statements of Fordstar Co. for the year ended December 31, 2010, follows:

Net cash provided by operations	$ 98,000
Cost of goods sold	310,000
Selling, general, and administrative expenses	124,000
Accounts payable	90,000
Extraordinary loss from hurricane, net of tax savings of $36,000	136,000
Research and development expenses	30,000
Net loss from discontinued operations, net of tax savings of $24,000	60,000
Provision for income taxes	78,000
Net sales	840,000
Interest expense	64,000

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

---

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

Step 1 of 3

Computation of income from operations & Net income

Income from operations : It refers to the amount of income realized from business’ direct operations.

Net income : It refers to the amount of income realized from business’ direct operation but after including its indirect income and expenditures during a financial period.