Question : 41.Which of the following would be classified as an extraordinary : 1237487

 

 

41.Which of the following would be classified as an extraordinary item?   

A. A large gift given to the company.

 

B. A loss from obsolete inventory.

 

C. A loss from a natural disaster that affects the company at infrequent intervals.

 

D. A loss from an enacted law that made inventory unsalable.

 

 

 

 

42.An example of an extraordinary gain or loss is:   

A. A large loss arising from inability to collect an account receivable from a bankrupt customer.

 

B. A large gain from disposal of a segment of the business.

 

C. A gain or loss from sale of an expensive machine no longer needed in the business.

 

D. A loss due to the expropriation of assets by a foreign government.

 

 

 

 

43.Which of the following items would be included in the discontinued operations section of the income statement?   

A. Income or loss from operating the segment prior to its disposal.

 

B. The gain or loss on disposal of the segment.

 

C. Both the income or loss from operating the segment prior to its disposal, and the gain or loss on disposal of the segment.

 

D. Only losses and not gains on the disposal of a segment.

 

 

 

 

44.Family Fashions Corporation discontinued Kid-Choice, its entire line of children’s clothing, in November of 2015. Prior to the disposal, Kid-Choice generated a loss of $600,000 (net of tax) for the period from January through the sale date. Because of the value of the real estate and machinery, there was a gain of $850,000 (net of tax) on the actual sale. How should this situation be reported in the financial statements of Family Fashions for 2015?   

A. A $250,000 gain should be included in the 2015 income statement as an extraordinary item.

 

B. A $600,000 loss should be included in income from operations and a $850,000 gain should be reported in the “discontinued operations” section of the income statement.

 

C. A $250,000 adjustment to beginning retained earnings should be in the statement of retained earnings.

 

D. A $250,000 gain should be in the “discontinued operations” section of the income statement.

 

 

 

 

45.Sovereign Foods suffered a $1,500,000 loss (net of tax) when the FDA prohibited the sale of food products containing red dye no. 3. On its other products, Sovereign Foods had net sales of $6,580,000 and costs and other expenses of $6,505,000. Which of the following statements is not true? (Ignore taxes)   

A. Sovereign Foods reports a net loss of $1,425,000 for the current year.

 

B. Sovereign Foods reports income before extraordinary items of $75,000.

 

C. Sovereign Foods combines the $1,500,000 loss with its other costs and expenses of $6,505,000, since this item does not qualify for any special disclosure.

 

D. Sovereign Foods shows the $1,500,000 loss in a separate section of the income statement as an extraordinary item.

 

 

 

 

46.Corona Corporation’s financial statements for the current year include the following:  On the basis of this information, net income for the current year is:   

A. $1,359,600.

 

B. $818,400.

 

C. $1,485,000.

 

D. $1,234,200.

$818,400 + $541,200 – $125,400 = $1,234,200

 

 

 

47.During the year 2015, Tosco Corporation suffered an $800,000 loss when its factory was destroyed in a flood. Assuming the corporate income tax rate is 36%, what amount will Tosco report as an extraordinary loss on its income statement for 2015? Assume floods are not common in this area.   

A. $800,000.

 

B. $512,000.

 

C. $288,000.

 

D. Nothing, since this does not qualify as an extraordinary item.

$800,000 × (1.00 – .36) = $512,000

 

 

 

48.Colfax Corporation’s financial statements for the current year include the following:  On the basis of this information, net income for the current year is:   

A. $1,251,200.

 

B. $696,400.

 

C. $570,600.

 

D. $1,439,600.

$696,400 + $743,200 – $188,400 = $1,251,200

 

 

 

49.During the year 2015, Torino Corporation suffered a $1,200,000 loss when its factory was severely damaged in an earthquake. Assuming the corporate income tax rate is 30%, what amount will Torino report as an extraordinary loss on its income statement for 2015? Assume earthquakes are not common in this area.   

A. $1,200,000.

 

B. $840,000.

 

C. $360,000.

 

D. Nothing, since this does not qualify as an extraordinary item.

$1,200,000 × (1.00 – .30) = $840,000

 

 

 

50.A company had 125,000 shares of common stock outstanding on January 1 and then sold 35,000 additional shares on March 30. Net income for the year was $594,750. What are earnings per share?   

A. $4.73.

 

B. $4.58.

 

C. $3.93.

 

D. $6.61.

(125,000 × 3/12) + (160,000 × 9/12) = 151,250; $594,750/151,250 = $3.93