If Capital Assets of a Manufacturing Company Are Sold at a Gain

question 38

Multiple Choice

If capital assets of a manufacturing company are sold at a gain of $820,000 less related taxes of $250,000, and the gain is not considered unusual or infrequent, the income statement for the period would disclose the effect if this sale as:

• A) a gain of $820,000 and an increase in income tax expense of $250,000.
• B) operating income net of applicable taxes, $570,000.
• C) a retroactive correction of prior years' error, net of applicable taxes, $570,000.
• D) an unusual item net of applicable taxes, $570,000.

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Definitions:

Forecast Errors

Discrepancies between predicted values and actual outcomes in forecasting, which can arise due to unexpected market changes or inaccurate data.

Aggregate Planning

A marketing activity that ensures supply meets demand by adjusting production rates, workforce levels, and inventory stock.

Overtime

Additional time worked by employees beyond their standard hours, often compensated at a higher pay rate.

Subcontracting

The practice of assigning or outsourcing part of the obligations and tasks under a contract to another party known as a subcontractor.