Reference no: EM132979288
Question - Trickster Company prepared the following income statement for the year ended December 31, 2018:
Sales 3,000,000
Cost of goods sold (1,400,000)
Gross profit 1,600,000
Gain on sale of equipment 50,000
Operating expenses (250,000)
Casualty loss due to fire (150,000)
Pre-tax income 1,250,000
Income tax expense (375,000)
Net income 875,000
Additional information:
Third quarter sales were 30% of total sales.
For interim reporting purposes, a gross profit rate of 40% can be justified.
Variable operating expenses are allocated in the same proportion as sales.
Fixed operating expenses are allocated based on passage of time.
Of the total operating expenses, P200,000 relate to variable expenses and the remainder relate to fixed expenses.
The equipment was sold on June 1, 2018.
The fire casualty loss occurred on September 1, 2018.
Required - What amount should be reported as pre-tax income for the third quarter ended September 30, 2018?