If a Company Has an Extraordinary Gain of $20,000 and a 32

question 177

Multiple Choice

If a company has an extraordinary gain of $20,000 and a 32% tax rate, what is the effect on net income?

• A) Increase of $20,000.
• B) Increase of $13,600.
• C) Increase of $6,400.
• D) No effect.

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Definitions:

Purchasing Power

Purchasing power refers to the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy, often used to measure the effect of inflation on income.

Inflation

The pace at which the overall price level of goods and services increases, thereby diminishing buying power.

Retirement Income

The funds an individual receives after retiring, which can come from various sources including pensions, savings, and social security.

Actuarial Calculations

The mathematical analysis performed by actuaries to calculate risks, premiums, life expectancies, and pension contributions, based on statistical data.