12. Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of€262,000. It also has the following items (gross amounts).€ 37,000101,000Unusual lossDiscontinued operations lossGain on disposal of equipmentChange in accounting principleincreasing prior year's income8,00053,000What is the amount of income tax expense Arreaga would report on its incomestatement?а. €104,800b. €93,200c. €111,200d. €74,000

Income tax is a type of tax levied by authorities on income earned by businesses and individuals…

12. Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of €262,000. It also has the following items (gross amounts). € 37,000 101,000 Unusual loss Discontinued operations loss

12. Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of €262,000. It also has the following items (gross amounts). € 37,000 101,000 Unusual loss Discontinued operations loss

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

12. Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of
€262,000. It also has the following items (gross amounts).
€ 37,000
101,000
Unusual loss
Discontinued operations loss
Gain on disposal of equipment
Change in accounting principle
increasing prior year's income
8,000
53,000
What is the amount of income tax expense Arreaga would report on its income
statement?
а. €104,800
b. €93,200
c. €111,200
d. €74,000

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