First Bank recognized an extraordinary loss from the settlement of a lawsuit with Fifth Street Bank that it had impeded on a processing patent. The extraordinary loss was in the amount of $4,250,000 and First Bank Corporation has an effective tax rate of 35%. First Bank paid the settlement immediately and recognized the tax benefit as a receivable to offset the current period's taxes.
Instructions:
a. Prepare the extraordinary item portion of First Bank Corporation's financial statement.
b. Using the analytical framework discussed in the text and reprinted below show the effect of following event on First Bank Corporation's financial statements.
Analytical Framework:

Question

Quizplus · Accepted Answer

The Answer of First Bank recognized an extraordinary loss from the settlement of a lawsuit with Fifth Street Bank that it had impeded on a processing patent. The extraordinary loss was in the amount of $4,250,000 and First Bank Corporation has an effective tax rate of 35%. First Bank paid the settlement immediately and recognized the tax benefit as a receivable to offset the current period's taxes.
Instructions:
a. Prepare the extraordinary item portion of First Bank Corporation's financial statement.
b. Using the analytical framework discussed in the text and reprinted below show the effect of following event on First Bank Corporation's financial statements.
Analytical Framework:

First Bank Recognized an Extraordinary Loss from the Settlement of a Lawsuit