Test 2 (Chapters 4,5,6,7)
1. Freda's Florist reported the following before-tax income statement items for the year ended
December 31, 2009:
All income statement items are subject to a 40% income tax rate. In its 2009 income statement,
Freda's separately stated income tax expense and total income tax expense would be:
A. $128,000 and $128,000, respectively.
B. $128,000 and $100,000, respectively.
C. $100,000 and $128,000, respectively.
D. $100,000 and $100,000, respectively.
2. On November 1, 2009, Jamison Inc. adopted a plan to discontinue its barge division, which
qualifies as a separate component of the business according to
SFAS No. 144
. The disposal of the
division was expected to be concluded by April 30, 2010. On December 31, 2009, the company's
year-end, the following information relative to the discontinued division was accumulated:
In its income statement for the year ended December 31, 2009, Jamison would report a before-
tax loss on discontinued operations of:
A. $ 65 million.
B. $ 50 million.
C. $130 million.
D. $145 million.