Use the Following Information for Questions

question 31

Multiple Choice

Use the following information for questions
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.
-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.

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Definitions:

Asset Efficiency

A measure of how effectively a company utilizes its assets to generate revenue.

Percentage of Sales Approach

A financial planning method that uses a specified percentage of sales or revenues to forecast future financial needs or growth requirements.

Variable Expenses

Costs that change in proportion to the activity or business volume.

Fixed Expenses

Costs that do not change in total despite fluctuations in business activity levels or volume, such as rent or salaries.