Reference no: EM132613504

Questions -

Q1. Orange Corp. constructed a machine at a total cost of $74 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 8-year life using the sum-of-the-years'-digits method. The residual value is expected to be $5 million. At the beginning of 2018, Orange decided to change to the straight-line method. Ignoring income taxes, what will be Orange's depreciation expense for 2018? (Do not round your intermediate calculation and round final answer to 1 decimal place.)

a. $6.8 million.

b. $11.8 million.

c. $5.8 million.

d. $8.6 million.

Q2. Moonland Company's income statement contained the following errors:

Ending inventory, December 31, 2018, understated by $6,500

Depreciation expense for 2018 overstated by $1,800

What is the effect of the errors on 2018 net income before taxes?

a. Understated by $8,300.

b. Overstated by $8,300.

c. Understated by $4,700.

d. Overstated by $4,700.

Q3. Berkshire Inc. uses a periodic inventory system. At the end of 2017, it missed counting some inventory items, resulting in an inventory understatement by $600,000. Assume that Berkshire has a 40% income tax rate and that this was the only error it made.

If undetected, what is the effect of this error on Berkshire's December 31,2017 balance sheet?

a. None of these answer choices are correct.

b. Assets understated by $600,000, liabilities understated by $240,000 and shareholders' equity understated by $360,000.

c. Assets understated by $600,000 and shareholders' equity understated by $600,000.

d. Assets understated by $360,000 and shareholders' equity understated by $360,000.

Q4. Kramer Inc. had 87 million shares of common stock, 1 million shares of 6%, $100 par, cumulative preferred stock, and 1 million shares of 8%, $100 par, noncumulative preferred stock outstanding at the end of 2017 and 2018. No dividends were declared or paid on common stock in either year. In 2018, a $2.2 million dividend was paid on the 6% preferred stock and a $3.2 million dividend was paid on the 8% preferred stock. Net income for 2018 was $292 million. The company's tax rate is 30%.

Required - Compute basic earnings per share for the year ended December 31, 2018.