At Ruth Company, events and transactions during 2014 included the following. The tax rate for all items is 30%.(1) Depreciation for 2012 was found to be understated by $90,000.(2) A strike by the employees of a supplier resulted in a loss of $75,000.(3) The inventory at December 31, 2012 was overstated by $120,000.(4) A flood destroyed a building that had a book value of $1,500,000. Floods are very uncommon in that area.The effect of these events and transactions on 2014 net income net of tax would be
A) ($52,500).
B) ($1,102,500).
C) ($1,165,500).
D) ($1,249,500).

Question

Quizplus · Accepted Answer

The flood loss is an unusual and infrequent event, resulting in a net loss of $1,050,000 after tax ($1,500,000 * (1 - 0.30)). The strike loss is a regular business expense, resulting in a net loss of $52,500 after tax ($75,000 * (1 - 0.30)). The total effect on 2014 net income is $1,102,500 ($1,050,000 + $52,500).

At Ruth Company, Events and Transactions During 2014 Included the Following