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  • #199215 Reply
    seaoh
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    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!

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  • #753026 Reply
    wombataholic
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    The $12,000 property tax expense is already included in the initial $95,000, so no adjustment is required.

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    #3315330 Reply
    Chan
    Guest

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

    #3315333 Reply
    Chan
    Guest

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

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