Unit 7 Assignment 3 – Extraordinary Items

Problem 3

Graland Inc make retaining walls and installs swimming pools. Work safety regulations require that the side walls of ditches and trenches be supported by various devices to protect workers from collapse. Graland also manufactures and sells a spray on concrete product that supports the walls of recently excavated trenches. Several years back, the company formed a separate business unit that provides spray on surface linings for swimming pools. That business unit has failed to meet management’s goals. At the beginning of the , Graland sold the swimming pool business, resulting in a $250,000 pretax gain. Garland also had some challenges this year. The union that supports the spray plant went on strike causing a loss in operations of $300000. The plant located in Maine was damanged by a hurricane causing an additional $500,000 pretax loss. The Garland spray product continues to be very successful. This year, product sales were $10,000,000, at a gross margin of 35%. Selling expenses totaled $800,000 and administrative expenses totaled $1,200,000. Graland is subject to a 40% income tax rate.