60. Cole 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 companys income before income taxes and extraordinary items was a. $240,000. b. $300,000. c. $330,000. d. $231,000.

61. A review of the December 31, 2007, financial statements of Baden Corporation revealed that under the caption extraordinary losses, Baden reported a total of $515,000. Further analysis revealed that the $515,000 in losses was comprised of the following items:

(1) Baden recorded a loss of $150,000 incurred in the abandonment of equipment formerly used in the business. (2) In an unusual and infrequent occurrence, a loss of $250,000 was sustained as a result of hurricane damage to a warehouse. (3) During 2007, several factories were shut down during a major strike by employees, resulting in a loss of $85,000. (4) Uncollectible accounts receivable of $30,000 were written off as uncollectible.

Ignoring income taxes, what amount of loss should Baden report as extraordinary on its 2007 income statement?

a. $150,000. b. $250,000. c. $400,000. d. $515,000.

Use the following information for questions 63 and 64.

At Hall Company, events and transactions during 2007 included the following. The tax rate for all items is 30%.

(1) Depreciation for 2005 was found to be understated by $30,000.

(2) A strike by the employees of a supplier resulted in a loss of $25,000. (3) The inventory at December 31, 2005 was overstated by $40,000. (4) A flood destroyed a building that had a book value of $500,000. Floods are very uncommon in that area.

63. The effect of these events and transactions on 2007 income from continuing operations net of tax would be a. $17,500. b. $38,500. c. $66,500. d. $416,500.

4 14 Test Bank for Intermediate Accounting, Twelfth Edition .0/msohtmlclip1/01/clip_image001.gif>

64. The effect of these events and transactions on 2007 net income net of tax would be

a. $17,500. b. $367,500. c. $388,500. d. $416,500.

65. During 2007, Gomez Corporation disposed of Pine Division, a major component of its business. Gomez realized a gain of $1,200,000, net of taxes, on the sale of Pines assets. Pines operating losses, net of taxes, were $1,400,000 in 2007. How should these facts be reported in Gomezs income statement for 2007?

Total Amount to be Included in

Income from

Results of

Continuing Operations

Discontinued Operations