Prepare a partial income statement for Apex Inc., beginning with income from continuing operations before income tax. Apex Inc.Partial Income StatementFor the Year Ended December 31
The Correct Answer and Explanation is :
Apex Inc.
Partial Income Statement
For the Year Ended December 31
| Description | Amount |
|---|---|
| Income from Continuing Operations Before Income Tax | $X,XXX,XXX |
| Income Tax Expense | ($XXX,XXX) |
| Income from Continuing Operations | $X,XXX,XXX |
Explanation:
The partial income statement typically focuses on a specific portion of the company’s financial performance, such as income from continuing operations before income tax and the tax impact on that income.
- Income from Continuing Operations Before Income Tax:
This is the amount earned by the company from its primary business activities before considering any income tax implications. It represents the company’s ability to generate profit from regular operations, such as sales of goods or services, after deducting expenses (like operating costs, depreciation, and other regular expenses). In the partial income statement, this line item is the starting point for the income statement and highlights the company’s operational efficiency and profitability. - Income Tax Expense:
The income tax expense is the amount Apex Inc. owes to the government based on its earnings. It is subtracted from income from continuing operations before tax to reflect the company’s obligation to pay taxes on its earnings. The tax rate and any tax deductions or credits available to Apex Inc. would impact the exact amount of tax expense. - Income from Continuing Operations:
After subtracting the income tax expense from income before tax, you get the “Income from Continuing Operations.” This is the final amount of profit that Apex Inc. retains after taxes from its regular business activities. It’s a key indicator of the company’s financial health and is often reported in both the income statement and other financial reports to show the core performance of the company.
This partial income statement is often used for analysis when focusing specifically on the ongoing operations of a company, leaving out one-time items like discontinued operations, extraordinary gains or losses, and other non-recurring events.