Use the Following to Answer Questions

question 55

Multiple Choice

Use the following to answer questions
Spectrum Corporation sold its Specialties Division during 2010. The company's accountants determined that the division had a pre-tax loss $770,000 during 2010 prior to disposal. The sale resulted in a $235,000 gain before taxes. The company had neither extraordinary items nor any cumulative accounting adjustments. Spectrum's income from continuing operations for 2010 amounted to $23,460,000. The company's effective tax rate is 38%.
-The amount of loss from operations of the Specialties Division that would appear on the 2010 income statement of Spectrum Corporation is:

• A)$770,000
• B)$477,400
• C)$331,700
• D)$292,600

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Definitions:

Long Put

An options strategy where an investor purchases a put option, betting that the underlying asset's price will decline below the strike price before expiration.

Collar Strategy

An investment strategy that uses options to limit the range of possible returns, protecting against large losses but also capping large gains.

Exercise Price

The price at which an option holder can buy (call option) or sell (put option) the underlying asset or security.

Call Options

Call options are financial contracts that give the buyer the right, but not the obligation, to buy a specified amount of an underlying asset, at a set price, within a specified period.