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The Following Information Is from L&H's 2004 Income Statement -Pre-Tax Earnings Growth of 50% for 2005 Has Just Been

Question 46

Multiple Choice

The following information is from L&H's 2004 income statement:
2004 Sales $14,000 Investment income 800$14,800 Cost of goods sold $7,000 Depreciation expense 2,500 Amortization expense 2,000 Interest expense 700$12,200Pre-tax income$2,600\begin{array}{|l|r|r|}\hline&&2004\\\hline \text { Sales } & \$ 14,000 \\\hline \text { Investment income } & 800 \\\hline && \$ 14,800 \\\hline \text { Cost of goods sold } & \$ 7,000 \\\hline \text { Depreciation expense } & 2,500 \\\hline \text { Amortization expense } & 2,000 \\\hline \text { Interest expense } & 700 \\\hline && \$ 12,200 \\\hline \text {Pre-tax income}&&\$2,600\\\hline\end{array}
-Pre-tax earnings growth of 50% for 2005 has just been announced after the close of trading, but further disclosure will not be made until tomorrow. That night, you review 2004 and conclude that, all else being equal, in 2005


A) Sales decreased by approximately $1,400
B) Sales increased by approximately $2,600
C) Investment income doubled, enabling L&H to cut interest expense by $500
D) L&H sold investments and/or fixed assets, realizing a gain of $1,300

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