Follett Company Incurred a First Quarter Operating Loss Before Income

question 43

Multiple Choice

Follett Company incurred a first quarter operating loss before income tax effect of $2,000,000.This is a normal occurrence for Follett because of seasonal fluctuations.Experience has demonstrated the income earned during the remaining quarters far exceeds the first quarter losses each year.Follett estimates its annual income tax rate will be 35 percent.What net loss should Follett report for the first quarter?

• A)$0
• B)$700,000
• C)$1,300,000
• D)$2,000,000

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Definitions:

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, usually with fixed dividends.

Cumulative Preferred Stock

A type of preferred stock whose dividends accumulate if not paid in the agreed periods.

Par Value

The nominal or face value of a stock or bond as stated by the issuer, often used in the accounting of capital accounts.

Dividend

A share of a company's profits paid out to its shareholders, typically in the form of cash or additional stock.