Chap020 (accounting) 79 - respectively on its bonds payable...

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87. A broadcasting company failed to make a year-end accrual of $400,000 for fines due to a violation of FCC rules. Its tax rate is 30%. As a result of this error, net income was: A. Unaffected. B. Overstated by $400,000. C. Overstated by $280,000. D. Overstated by $120,000. $400,000 x (1-0%) = $400,000 Fines paid for violations of the law are not tax deductible. AACSB: Analytic Bloom's: Analysis Learning Objective: 20-06 Understand and apply the four-step process of correcting and reporting errors; regardless of the type of error or the timing of its discovery. Level of Learning: Hard 88. In the previous year, a firm failed to record premium amortization of $40,000 and $30,000,
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Unformatted text preview: respectively, on its bonds payable and held to maturity bond investments. These errors affect both income before tax and taxable income. The firm's tax rate is 30%. As a result of this error, net income was: A. Understated by $7,000. B. Overstated by $7,000. C. Understated by $33,000. D. Overstated by $33,000. AACSB: Analytic Bloom's: Analysis Learning Objective: 20-06 Understand and apply the four-step process of correcting and reporting errors; regardless of the type of error or the timing of its discovery. Level of Learning: Hard...
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