Question

1. Jacobsen Corporation Prepares its financial statements applying U.S. GAAP. During its 2018 fiscal year, the company reported income from continuing operations before tax of $620,000. This amount does not include the following item, which is considered to be material in an amount: Loss from discontinued operations (100,000) Restructuring cost $100,000.

The company’s income tax rate is 40%. In its 2018 income statement, Jacobsen would report income from continuing operations (after tax) of:

a. $520,000

b. $312,000

c. $252,000

d. $372,000

2. Misty company reported the following before-tax items during the current year:

Gross profit $600

Operating expenses 250

Restructuring charges 20

Goodwill impairment loss 60

Loss on the discontinued operation 50

Misty’s effective tax rate is 40%

What is Misty’s income from continuing operation?

a. $162

b. $198

c. $220

d. $270

3. Loan A has the same original principal, interest rate, and payment amount as Loan B. However, Loan A’s payment is structured an annuity due, while Loan B’s payment is structured as an ordinary annuity. The maturity date of Loan A will be:

a. Earlier than Loan B

b. Later than Loan B.

c. The same as Loan B

d. Cannot decide based on the information is given

4.  CattleCompany，with an applicable income tax rate of 30%, reported a net income of $560,000 (the last items on the income statement). Included in income for the period was a discontinued operation loss of $80,000 before deducting the related tax effect. The company’s income before income taxes and discontinued operation was

a. $640,000

b. $800,000

c. 880,000

d. 616,000

Answer 1

ANS-1	Income form Continue opreration	$620000.00
	Loss form discontinue opreation	$100000.00
	Restructuring Cost	$100000.00
	Note- Loss form discontinue opration is consider as other comprehensive Income part we can,t consider it for tax purpose.
	Tax on continue opration @40% on $520000=	$2,48,000.00
	Net Income will be =$520000-$208000	$3,12,000.00
	HENCE OPTION (b) IS CORRECT
ANS-2	Gross Profit	$600.00
	Less: Operating Exp.	$250.00
		$350.00
	less: Goodwill impairment	$60.00
	less :restructuring cost	$20.00
	Net Income	$270.00
	Tax@40%	$108.00
	Profit after Tax	$162.00
	Hence Option (a) is correct
ANS-3	The payments in an ordinary annuity occur at the end of each period. In contrast, an annuity due features payments occurring at the beginning of each period.
	Hence maturity date of Loan A is earlier than Loan B
	Option (a) is correct
Ans-4	as per given question loss from discontinue opreration was not consider for the calculation of net income .hence dicontinue opration loss of $80000 was not consider for calculation company income
	Hence Net Income	560000
	Tax charge	30%
	Income=56000/(100-30)%	800000
	Option (b) is correct