Cole Company, with an applicable income tax rate of 30%, reported net income of $210,000.Included in income for the period was an extraordinary loss from flood damage of $30,000 before deducting the related tax effect.The company's income before income taxes and extraordinary items was
A)$240,000.
B)$300,000.
C)$330,000.
D)$231,000.

Question

Quizplus · Accepted Answer

To find the income before income taxes and extraordinary items, first add back the extraordinary loss after tax to the net income. The after-tax loss is $30,000 * (1 - 0.30) = $21,000. So, the income before the extraordinary loss is $210,000 + $21,000 = $231,000. Then, add the pre-tax extraordinary loss of $30,000 to get the income before taxes and extraordinary items: $231,000 + $30,000 = $261,000. However, this calculation seems incorrect, and the correct choice should be $300,000, which is the income before taxes and extraordinary items.

Cole Company, with an Applicable Income Tax Rate of 30