Reference no: EM132804186

Seven Line Corporation manufactures sports gear and merchandise. Presented below is information related to Seven Line Corporation for the current fiscal year.

All amounts are pre-tax. The tax rate is 30%. Use the information below to prepare multi-step income statement and answer the following multiple-choice questions.  

Sales Revenue $1,550,000
Unearned Revenue 20,000
Sales Returns 50,000
Selling and Administrative Expense 240,000
Loss from Hurricane Joaquin 290,000
Cost of Goods Sold 880,000
Restructuring Charges 20,000
Gain on Sale of Plant Assets 10,000
Income from Sneaker Division 50,000
Unrealized Gain on Available for Sale Securities 10,000
Accumulated Other Comprehensive Income 30,000

Other notes for the fiscal year:

1. Hurricane Joaquin was the first one hurricane to affect the company in 10 years.
2. On the last date of the fiscal year, Seven Line Corporation sold its Sneakers division to Grand Slam Corporation for a gain of $53,000 before tax.

Problem 1: What is net income for Seven Line Corporation?

A. None of the above
B. $149,100
C. $128,100
D. $135,100

Problem 2: How should Seven Line Corporation report the Sneakers division?

A. None of the above.
B. As a $53,000 pretax gain/ income under "Other Gains/Losses"
C. As a $72,100 gain/income, net of tax under "Discontinued Operations"
D. As a $37,100 gain/ income, net of tax under "Discontinued Operations"