Richardson Company reported pretax income from continuing operations in the first six months of 2012 in the
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During the third quarter of 2012, the company changed accounting principles that after retrospective application resulted in pretax income for the first six months increasing by $20,000 and projections for the balance of the year increasing by $25,000. During the third quarter of 2012, the company experienced pretax operating income of $80,000 and projected a pretax operating income of $20,000 for the fourth quarter. At the end of the third quarter, the company estimated that annual income from municipal bonds would be $4,000 and the annual tax credit would only be $5,000. During the third quarter, the company also experienced a non-ordinary loss of $40,000 and a non-ordinary gain of $60,000.
Statutory income tax rates are 10% on the first $50,000 of income, 20% on the next $50,000 of income, 30% on the next $50,000 of income, 40% on the next $50,000 of income, and 35% on all remaining income.
1. Determine the impact on tax expense for the first six months of 2012 as a result of the change in accounting principle.
2. Determine the tax expense or benefit traceable to the two non-ordinary items.
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Related Book For
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
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