Practice Question

1. Suppose a business owes $20,000 in income taxes and $3,000 in payroll taxes. How does the income statement display these numbers?

The income statement lists $20,000 as a separate item near the bottom of the page and the $3,000 as an operating expense.
The income statement lists the $3,000 as a separate item near the bottom of the page and the $20,000 as an operating expense.
The income statement does not list the $20,000, but the $3,000 is on a separate line near the bottom.