Question

At Ruth 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 $150,000. (2) A strike by the employees of a supplier resulted in a loss of $125,000. (3) The inventory at December 31, 2018 was overstated by $200,000. The effect of these events and transactions on 2020 income from continuing operations net of tax would be A. ($280,000). B. ($380,000). C. ($220,000). D. ($100,000).

Answer 1

Answer:

D. ($100,000)

Explanation:

Calculation for what The effect of these events and transactions on 2020 income from continuing operations net of tax would be

Continuing operations net of tax=(20%*$125,000)-$125,000

Continuing operations net of tax=$25,000-$125,000

Continuing operations net of tax=($100,000)

Therefore The effect of these events and transactions on 2020 income from continuing operations net of tax would be ($100,000)