QUESTION #1

Gumble Corporation had income from continuing operations of $300,000 for the year ended December 31, 2008. It also had the following items (before income taxes):

1. Extraordinary flood loss of $150,000.

2. Loss of $60,000 on discontinuance of a division.

All items are subject to income taxes at a 30% tax rate.

Instructions

Prepare a partial income statement, beginning with income from continuing operations.

QUESTION #2

Presented below is a list of costs and expenses incurred in the factory by Nu-Way Corporation, a manufacturer of recreational vehicles.

____ 1. Property taxes on the factory land

____ 2. Nails and glue used in production

____ 3. Cabinet maker's wages

____ 4. Factory supervisors salaries

____ 5. Metal used in manufacturing

____ 6. Depreciation on factory machines

____ 7. Factory utilities

____ 8. Carpeting for the recreational vehicles

____ 9. Property taxes on the factory building

____ 10. Insurance on factory equipment

Instructions

Classify the above items into the following categories:

DM Direct Materials

DL Direct Labor

MO Manufacturing Overhead