During the year 2015,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 2015? Assume floods are not common in this area.

Question

Quizplus · Accepted Answer

An extraordinary loss is a material and unusual event that is both infrequent and not expected to recur in the foreseeable future. Since floods are not common in the area, the loss incurred by Tosco Corporation due to the flood would qualify as an extraordinary item. 
The tax-deductible amount of the loss would be $800,000 x 36% = $288,000. Therefore, Tosco Corporation would report an extraordinary loss of $512,000 ($800,000 - $288,000) on its income statement for 2015.

During the Year 2015,Tosco Corporation Suffered an $800,000 Loss When