Question

A company failed to record unrealized gains of $38 million on its available for sale debt...

A company failed to record unrealized gains of $38 million on its available for sale debt security investments. Its tax rate is 30%. As a result of this error, comprehensive income would be (Round million answer to 2 decimal places.):

Multiple Choice

  • Understated by $26.60 million.

  • Understated by $11.40 million.

  • Understated by $38.00 million.

  • Unaffected.

Due to an error in computing depreciation expense, Prewitt Corporation overstated accumulated depreciation by $13 million as of December 31, 2018. Prewitt has a tax rate of 35%. Prewitt's retained earnings as of December 31, 2018, would be (Round million answer to 2 decimal places.):

Multiple Choice

  • Understated by $8.45 million.

  • Overstated by $4.55 million.

  • Overstated by $8.45 million.

  • Understated by $4.55 million.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer- As a result of this error, comprehensive income would be = Understated by $26.60 million.

Explanation- The amount of comprehensive income would be understated by = Unrealized gain available for sale debt security – Tax rate

= $38 million- ($38 million *30%)

= $38 million- $11.40 million

= $26.60 million

Where- Unrealized gains on securities available for sale are reported net of tax in other comprehensive income.

Answer- Prewitt's retained earnings as of December 31, 2018, would be = Understated by $8.45 million.

Explanation- Retained earnings as of December 31, 2018, would be understated by =Amount of accumulated depreciation- Tax rate

= $13 million - ($13 million*35%)

= $13 million - $4.55 million

= $8.45 million

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2018,...
The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2018, included the following income accounts: Account Title Debits Credits Sales revenue 2,560,000 Cost of goods sold 1,520,000 Selling and administrative expenses 438,000 Interest expense 52,000 Unrealized holding gains on investment securities 92,000 The trial balance does not include the accrual for income taxes. Lindor's income tax rate is 40%. 1.2 million shares of common stock were outstanding throughout 2018. Required: Prepare a single, continuous...
Duke Company’s records show the following account balances at December 31, 2018: Sales $ 17,000,000 Cost...
Duke Company’s records show the following account balances at December 31, 2018: Sales $ 17,000,000 Cost of goods sold 10,000,000 General and administrative expenses 1,100,000 Selling expenses 600,000 Interest expense 800,000 Income tax expense has not yet been determined. The following events also occurred during 2018. All transactions are material in amount. $400,000 in restructuring costs were incurred in connection with plant closings. Inventory costing $500,000 was written off as obsolete. Material losses of this type are considered to be...
The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2016,...
The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2016, included the following income accounts:   Account Title Debits Credits   Sales revenue 2,640,000   Cost of goods sold 1,560,000     Selling and administrative expenses 434,000     Interest expense 56,000     Unrealized holding gains on investment securities 96,000 The trial balance does not include the accrual for income taxes. Lindor's income tax rate is 40%. 1.6 million shares of common stock were outstanding throughout 2016. Required: Prepare a single, continuous...
The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2016,...
The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2016, included the following income accounts:   Account Title Debits Credits   Sales revenue 2,500,000   Cost of goods sold 1,490,000     Selling and administrative expenses 421,000     Interest expense 49,000     Unrealized holding gains on investment securities 89,000 The trial balance does not include the accrual for income taxes. Lindor's income tax rate is 30%. 1.5 million shares of common stock were outstanding throughout 2016. Required: Prepare a single, continuous...
A company had net fixed assets of $7 million on December 31, 2018 and $10 million...
A company had net fixed assets of $7 million on December 31, 2018 and $10 million on December 31, 2019. For 2019, the company’s depreciation expense was $1 million and its cash flow from operations was $7 million. During 2019, the company’s net working capital increased by $500,000 and net capital spending was $4 million. What was the firm’s cash flow from assets? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and...
Multiple Choice Question 44 Sandhill Inc., a real estate developing company, was accounting for its long-term...
Multiple Choice Question 44 Sandhill Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2018. In 2018, it changed to the percentage-of-completion method. The company decided to use the same for income tax purposes. The tax rate enacted is 40%. Income before taxes under both the methods for the past three years appears below. 2016 2017 2018 Completed contract $490000 $324000 $158000 Percentage-of-completion 790000 407000 310000 What amount will be...
The Flounder Corporation had income from continuing operations of $13 million in 2020. During 2020, it...
The Flounder Corporation had income from continuing operations of $13 million in 2020. During 2020, it disposed of its restaurant division at a loss of $82,000 (net of tax of $38,000). Before the disposal, the division operated at a loss of $218,000 (net of tax of $135,000) in 2020. Blue Collar also had an unrealized gain-OCI of $44,000 (net of tax of $18,000) related to its FV-OCI equity investments. Flounder had 10 million common shares outstanding during 2020. Prepare a...
Presented below is information related to 2020 for Oriole Company. Retained earnings, December 31, 2019 $658,000...
Presented below is information related to 2020 for Oriole Company. Retained earnings, December 31, 2019 $658,000 Sales revenue 1,487,000 Selling and administrative expenses 244,000 Discontinued operations loss (pre-tax) 295,000 Cash dividends declared on common stock 33,600 Cost of goods sold 891,000 Gain discovered in 2020, from error on depreciation charge in 2018 (pre-tax) 524,000 Other revenue 116,000 Other expenses 102,500 Prepare in good form a multiple-step income statement for the year 2020. Assume a 30% tax rate and that 80,000...
The preliminary 2018 income statement of Alexian Systems, Inc., is presented below: ALEXIAN SYSTEMS, INC. Income...
The preliminary 2018 income statement of Alexian Systems, Inc., is presented below: ALEXIAN SYSTEMS, INC. Income Statement For the Year Ended December 31, 2018 ($ in millions, except earnings per share) Revenues and gains: Net sales $ 430 Interest 8 Other income 131 Total revenues and gains 569 Expenses: Cost of goods sold 275 Selling and administrative 154 Income taxes 56 Total expenses 485 Net Income $ 84 Earnings per share $ 4.20 Additional information: Selling and administrative expenses include...
The first audit of the books of Sandhill Company was made for the year ended December...
The first audit of the books of Sandhill Company was made for the year ended December 31, 2018. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the beginning of 2016, the company purchased a machine for $516,000 (salvage value of $51,600) that had a useful life of 6 years. The bookkeeper used straight-line depreciation but failed to deduct the salvage value in...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT