Dandy Candy Company Sold Its Licorice Division Resulting in a Loss

question 58

Multiple Choice

Dandy Candy Company sold its licorice division resulting in a loss of $80,000. Assuming a tax rate of 25%, the loss on this disposal will be reported on the income statement at what amount?

• A) $100,000
• B) $20,000
• C) $80,000
• D) $60,000

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Definitions:

Solvency

The ability of an entity to meet its long-term financial obligations and continue operations into the foreseeable future.

Times Interest Earned Ratio

A financial metric that measures a company's ability to meet its interest obligations, calculated by dividing earnings before interest and taxes by interest expenses.

Acid-Test Ratio

A financial metric that assesses a company's ability to pay off its current liabilities with its most liquid assets, excluding inventory.

Days' Sales Uncollected

A financial metric that measures the average number of days it takes a company to collect payments after a sale has been made.