[seaoh]

Kell Corp.’s $95,000 net income for the quarter ended September 30, 20X1, included the following after-tax items:

A $60,000 extraordinary gain, realized on April 30, 20X1, was allocated equally to the second, third, and fourth quarters of 20X1.

A $16,000 cumulative-effect loss resulting from a change in inventory method was recognized on August 2, 20X1.

In addition, Kell paid $48,000 on February 1, 20X1, for 20X1 calendar-year property taxes. Of this amount, $12,000 was allocated to the third quarter of 20X1.

For the quarter ended September 30, 20X1, Kell should report net income of:

A. $91,000.

B. $103,000.

C. $111,000.

D. $115,000.

Answer is: $91,000 because 95,000-20,000+16,000

I am confused why the $12,000 in taxes allocated to that quarter are not included in net income?

Thanks!

AUD - 81 (8/15)
BEC - 83 (10/15)
FAR - 84 (1/16)
REG - 79 (5/16)

[wombataholic]

The $12,000 property tax expense is already included in the initial $95,000, so no adjustment is required.

AUD - 91
BEC - 85
FAR - 91
REG - 92

CPA, CFE
Passed all 4 CPA exam sections with Ninja Notes/MCQ/Audio

Licensed CPA
Passed each section on the first try with Ninja Notes/MCQ/Audio

[Chan]

Why was the ($16,000) loss added back if it occurred in the 3rd quarter?

[Chan]

Why was the ($16,000) loss added back if it occurred in the 3rd quarter?

[Author]

Replies