Alpha Company Reported Net Incomes in 2010 and 2011 Before

question 32

Multiple Choice

Alpha Company reported net incomes in 2010 and 2011 before sustaining a significant operating loss in 2012. All of the 2012 loss can be carried back against the income of 2010 and 2011 for purposes of determining the company's 2009 income tax liability. How should the carryback be presented in the company's 2012 financial statements?

• A) As an extraordinary item in the income statement
• B) As a revenue from operations in the income statement
• C) As the correction of an error in the retained earnings statement
• D) As a reduction in the operating loss on the income statement for the year 2012

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Definitions:

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced, showing the cost of each unit's share of the fixed expenses.

Average Variable Cost

Average variable cost is the total variable cost divided by the quantity of output produced, indicating the variable cost incurred per unit of output.

Total Cost

The sum of all costs incurred by a business in producing a given level of output, including fixed and variable costs.

Diminishing Marginal Returns

Describes a point in production where the addition of one more unit of input results in a less than proportional increase in output.