Explore BrainMass

Explore BrainMass

    Accounting Questions

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    2.
    Pat's Pottery reported the following before-tax income statement items:

    Operating income $600,000

    Extraordinary loss 100,000

    Extraordinary gain 60,000

    Pat's has a 25% income tax rate.

    Pat's would report the following amount of income tax expense as a separate item in the income statement

    Option are:

    $175,000
    $165,000
    $150,000
    $140,000

    4. Galen Computing reported the following before-tax income statement items for the year ended December 31, 2008:
    Operating income before the two items below: $250,000
    Change in accounting estimate which increased income $40,000
    Extraordinary gain $70,000

    All income statement items are subject to a 30% income tax rate. In its 2008 income statement, Galen's separately stated income tax expense and total income tax expense would be:

    Option are:

    $84,000 and $84,000.
    $87,000 and $108,000.
    $75,000 and $84,000.
    $63,000 and $ 9,000.

    6.
    On August 1, 2007, Fox Retailers adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business by SFAS 144 . The disposal of the division was expected to be concluded by June 30, 2008. On January 31, 2008, Fox's fiscal year-end, the following information relative to the discontinued division was accumulated:

    Operating loss February 1, 2007 - Jan. 31, 2008 $115,000
    Estimated operating losses, Feb. 1 to Jun. 30, 2008 $80,000
    Impairment of division assets at Jan. 31, 2008 $10,000

    In its income statement for the year ended January 31, 2008, Fox would report a before-tax loss on discontinued operations of:

    $115,000.
    $195,000.
    $ 65,000.
    $125,000.

    5. Now, a cumulative effect of a change in accounting principle is reported as:

    A restatement of retained earnings
    A separate line component of income
    A prior period adjustment
    Income from modified operations

    © BrainMass Inc. brainmass.com June 3, 2020, 8:35 pm ad1c9bdddf
    https://brainmass.com/business/financial-statements/before-tax-income-statements-items-144378

    Solution Preview

    2. The answer is $150,000. $600,000 x 25% = $150,000

    4. The answer is between $75,000 and $84,000. Why?
    Income tax expense stated ...

    Solution Summary

    2.
    Pat's Pottery reported the following before-tax income statement items:

    Operating income $600,000

    Extraordinary loss 100,000

    Extraordinary gain 60,000

    Pat's has a 25% income tax rate.

    Pat's would report the following amount of income tax expense as a separate item in the income statement

    Option are:

    $175,000
    $165,000
    $150,000
    $140,000

    4. Galen Computing reported the following before-tax income statement items for the year ended December 31, 2008:
    Operating income before the two items below: $250,000
    Change in accounting estimate which increased income $40,000
    Extraordinary gain $70,000

    All income statement items are subject to a 30% income tax rate. In its 2008 income statement, Galen's separately stated income tax expense and total income tax expense would be:

    Option are:

    $84,000 and $84,000.
    $87,000 and $108,000.
    $75,000 and $84,000.
    $63,000 and $ 9,000.

    6.
    On August 1, 2007, Fox Retailers adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business by SFAS 144 . The disposal of the division was expected to be concluded by June 30, 2008. On January 31, 2008, Fox's fiscal year-end, the following information relative to the discontinued division was accumulated:

    Operating loss February 1, 2007 - Jan. 31, 2008 $115,000
    Estimated operating losses, Feb. 1 to Jun. 30, 2008 $80,000
    Impairment of division assets at Jan. 31, 2008 $10,000

    In its income statement for the year ended January 31, 2008, Fox would report a before-tax loss on discontinued operations of:

    $115,000.
    $195,000.
    $ 65,000.
    $125,000.

    5. Now, a cumulative effect of a change in accounting principle is reported as:

    A restatement of retained earnings
    A separate line component of income
    A prior period adjustment
    Income from modified operations

    $2.19

    ADVERTISEMENT