Thomas Company Compiled the Following Information from Its Financial Records

question 56

Multiple Choice

Thomas Company compiled the following information from its financial records for the year ending December 31, 2014:
$\begin{array}{ll}\text {Research and development costs incurred during 2014 }& \$1,200,000\\\text {Total assets }&5,200,000 \\\text { Current liabilities, interest bearing}&300,000 \\\text {Current liabilities, noninterest-bearing }& 800,000\\\text {Net income }&950,000 \\\text { Sales}&11,300,000 \\\text {Interest expense }&670,000 \\\text {Cost of capital }& 10\%\\\text {income tax rate }& 30\%\\\end{array}$

Thomas' amortization policy is 4 years. How much is the accounting distortion adjustment to NOPAT when calculating EVA?

• A) $900,000
• B) $630,000
• C) $840,000
• D) $270,000

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