Cost Accountjng

Chapter 4 Review Problems

  80.     Dole Company, with an applicable income tax rate of 30%, reported net income of $210,000. Included in income for the period was an extraordinary loss from flood damage of $30,000 before deducting the related tax effect. The company's income before income taxes and extraordinary items was

a.   $240,000.

b.   $300,000.

c.   $330,000.

d.   $231,000.

  85.     Sandstrom Corporation has an extraordinary loss of $50,000, an unusual gain of $35,000, and a tax rate of 40%. At what amount should Sandstrom report each item?

     Extraordinary loss               Unusual gain

a.         $(50,000)                          $35,000

b.           (50,000)                            21,000

c.           (30,000)                            35,000

d.           (30,000)                            21,000

  87.     Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of $232,000. It also has the following items (gross amounts).

            Unusual loss                                                                   $  37,000

            Extraordinary loss                                                            101,000

            Gain on disposal of equipment                                            8,000

      Change in accounting principle

          increasing prior year's income                                       53,000

            What is the amount of income tax expense Arreaga would report on its income statement?

a.   $92,800

b.   $81,200

c.   $99,200

d.   $62,000

  91.     In 2010, Linz Corporation reported an extraordinary loss of $1,000,000, net of tax. It declared and paid preferred stock dividends of $100,000 and common stock dividends of $300,000. During 2010, Linz had a weighted average of 200,000 common shares outstanding. Compute the effect of the extraordinary loss, net of tax, on earnings per share.

a.   $3.00

b.   $3.50

c.   $4.50

d.   $5.00

             d  ...