Take Home Quiz One
Problem 1 (2 points)
Shown below is an income statement for 2008 that was prepared by a poorly trained bookkeeper
of Sanctuary Corporation.
December 31, 2008
Cost of goods sold
Income before income taxes
Major casualty loss (extraordinary item)
Cumulative effect of change in accounting principle
Net federal income tax liability
In addition to the above information, the bookkeeper failed to consider the following issues:
In December, the bookkeeper discovered that depreciation in the amount of $50,000 (pre-
tax) on a piece of equipment had not been recorded in 2001.
At the end of December, the bookkeeper found out that a component of the business had
From January through December, the component had incurred an operating
loss of $125,000.
The sale was made at a loss of $50,000.