Question

Frahm Company incurred a first quarter operating loss before income tax effect of $4,000,000. This is a normal occurrence for Frahm because of seasonal fluctuations. Experience has demonstrated the income earned during the remaining quarters far exceeds the first quarter losses each year. Frahm estimates its annual income tax rate will be 30 percent. What net loss should Frahm report for the first quarter?

Answer 1

Answer: $2,800,000

Step-by-step explanation:

From the question, we are informed that Frahm estimates its annual income tax rate will be 30 percent and incurred a first quarter operating loss before income tax effect of $4,000,000.

The net loss should Frahm report for the first quarter will be:

= $4,000,000 - (30% × $4,000,000)

= $4,000,000 - (0.3 × $4,000,000)

= $4,000,000 - $1,200,000

= $2,800,000