Question

Hi, please help to explain the problems below.

For question 85, I wonder why the extraordinary loss is calculated net of tax, while the usual gain is not calculated net of tax?

Thanks

85.     Sandstrom Corporation has an extraordinary loss of $200,000, an unusual gain of $140,000, and a tax rate of 40%. At what amount should Sandstrom report each item?

     Extraordinary loss               Unusual gain

a.      $(200,000)                        $140,000

b.        (200,000)                            84,000

c.        (120,000)                          140,000

d.        (120,000)                            84,000

83. At Ruth Company, events and transactions during 2014 included the following. The tax rate for all items is 30%.Thanks

(1)   Depreciation for 2012 was found to be understated by $90,000.

(2)   A strike by the employees of a supplier resulted in a loss of $75,000.

(3)   The inventory at December 31, 2012 was overstated by $120,000.

(4)   A flood destroyed a building that had a book value of $1,500,000. Floods are very uncommon in that area.

            The effect of these events and transactions on 2014 net income net of tax would be

a.   ($52,500).

b.   ($1,102,500).

c.   ($1,165,500).

d.   ($1,249,500).

Answer 1

055,000