At Sunland Company, events and transactions during 2020 included the following. The tax rate for all items is 20%. (1) Depreciation for 2018 was found to be understated by $119400. (2) A strike by the employees of a supplier resulted in a loss of $92400. (3) The inventory at December 31, 2018 was overstated by $156900. (4) A disposal of a component of the business resulted in a $2000000 loss. The effect of these events and transactions on 2020 net income net of tax would be:

a. ($1754000

b. ($1673920)

c. ($1894960)

d. ($74420).

Question

Business

Alisa Sawyer

7 May, 14:26

At Sunland Company, events and transactions during 2020 included the following. The tax rate for all items is 20%. (1) Depreciation for 2018 was found to be understated by $119400. (2) A strike by the employees of a supplier resulted in a loss of $92400. (3) The inventory at December 31, 2018 was overstated by $156900. (4) A disposal of a component of the business resulted in a $2000000 loss. The effect of these events and transactions on 2020 net income net of tax would be:

a. ($1754000

b. ($1673920)

c. ($1894960)

d. ($74420).

+4

Answers (1)

Know the Answer?

Samuel Terrell · Answer 1

B. $1673920

Explanation:

First calculate Total loss

$2000000 loss from disposal of a component of the business and loss of $92400 from strike by the employees of a supplier

$2000000 + $92400 = $2,092,400

20% of the loss =

20% * $2,092,400

= $418,480

Therefore the effect of these events and transactions on 2020 net income net of tax would = Total loss - 20% of total loss

$2,092,400 - $418,480

= $1,673,920