During the year 2009, Tosco Corporation suffered an $800,000 loss when its factory was destroyed in a flood. Assuming the corporate income tax rate is 36%, what amount will Tosco report as an extraordinary loss on its income statement for 2009? Assume floods are not common in this area.

Question

Quizplus · Accepted Answer

An extraordinary loss is a unique and unusual event that is not expected to recur frequently in the future. Since floods are not common in this area, the $800,000 loss would be considered extraordinary. To calculate the extraordinary loss, we need to multiply the loss by (1 - tax rate). 
Extraordinary loss = $800,000(1 - 0.36) = $512,000. Therefore, Tosco Corporation will report $512,000 as an extraordinary loss on its income statement for 2009.

During the Year 2009, Tosco Corporation Suffered an $800,000 Loss