1.) A Firm reports Sales of $10,000, COGS of $7,000, Depreciation of $1,500, an Impairment charge of $500, Earnings before Taxes of $1,000, Taxes of $250, and Net Income of $750. As an analyst, you believe that this Impairment Charge represents a Big Bath that results in an understatement of earnings this year and an overstatement of previous and future earnings. You decide to spread the charge out over four years (the previous two years, this year, and next year). After making your adjustments, what is the New Net Income for this year?

a) $875 b) $917 c) $1,031 d) $1,125

2.) The firm in the previous question reported fixed assets of $7,500 at the end of last year (the year before the impairment charge was taken). What will the new value of Fixed Assets be for last year?

a) $7,000 b) $7,250 c) $7,375 d) $7,625

3.) A firm reports Net Income of $7,500 on the Income Statement. On the Balance Sheet, they report Accumulated Other Comprehensive Income of -$10,000 and you believe that amount should be allocated over 20 years. If the tax rate is 25%, then how much should Net Income be after making the adjustment?

a) $7,000 b) $7,125 c) $7,375 d) $7,625

4.) A firm reports Assets of $7,500 on the Income Statement. On the Balance Sheet, they report Assets of $75,000, Equity of $25,000 and Liabilities of $50,000 which includes a Deferred Tax Liability $5,000. If the tax rate is 25%, then how much should Equity be after making the adjustment?

a) $10,000 b) $15,000 c) $20,000 d) $30,000