Explore BrainMass

Four Objective Accounting and Auditing Questions

3. Sprite Co. reports income of $300,000 from continuing operations before income taxes and a before-tax extraordinary loss of $80,000. All income is subject to a 30% tax rate. In the year's income statement, Sprite Co. would show the following line-item amounts for income tax expense and net income:

$66,000 and $210,000
$90,000 and $154,000
$90,000 and $276,000
$66,000 and $220,000

Land was acquired in 2006 for a future building site at a cost of $40,000. The assessed valuation for tax purposes is $27,000, a qualified appraiser placed its value at $48,000, and a recent firm offer for the land was for a cash payment of $46,000. The land should be reported in the financial statements at:


12. The FASB's conceptual framework's primary qualitative characteristics of accounting information include:

Historical cost.
Full disclosure.

13. The assumption that in the absence of contrary information a business entity will continue indefinitely is the:
Periodicity assumption.
Entity assumption.
Going concern assumption.
Historical cost assumption.

Solution Preview

3. The net amounts are 300,000 - 80,000 = 220,000 - 30% for income tax = 154,000. The 90,000 is calculated as 300,000 x 30%. The tax savings generated by the extraordinary loss is netted with the loss itself. Effectively, the 90,000 of income tax is that which is ...

Solution Summary

The solution provides the answers to the four multiple choice questions including a sentence or two in explanation.