Studios Reported a Net Capital Loss of $30,000 in Year

question 82

Multiple Choice

Studios reported a net capital loss of $30,000 in year 5.It reported net capital gains of $14,000 in year 4 and $27,000 in year 6.What is the amount and nature of the book-tax difference in year 6 related to the net capital carryover?

• A)$11,000 unfavorable.
• B)$11,000 favorable.
• C)$16,000 unfavorable.
• D)$16,000 favorable.

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Definitions:

Margin Of Safety

The difference between actual sales and break-even sales, indicating how much sales can fall before a business incurs a loss.

Break-Even Sales

The amount of revenue required to cover both the fixed and variable costs of production.

Actual Sales

The exact amount of sales revenue that a company has generated over a specific period, as opposed to projected or forecasted sales.

High-Low Method

A technique used in cost accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.