The Accountant at Cedric Company Has Determined That Income Before

question 108

Multiple Choice

The accountant at Cedric Company has determined that income before income taxes amounted to $7,000 using the FIFO costing assumption. If the income tax rate is 30% and the amount of income taxes paid would be $315 greater if the LIFO assumption were used, what would be the amount of income before taxes under the LIFO assumption?

• A) $5,950
• B) $7,000
• C) $7,315
• D) $8,050

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Definitions:

Call Option

A financial contract granting the buyer the right to buy an asset at a specified price before a set date.

Exercise Price

The cost at which the person holding the option has the right to purchase (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Underlying Stock

This refers to the stock on which derivative contracts, such as options and futures, are based.

American Call

A type of call option that can be exercised at any time before its expiration date.