At Sandhill Co., 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 $118400. (2) A strike by the employees of a supplier resulted in a loss of $101700. (3) The inventory at December 31, 2018 was overstated by $151900. (4) A disposal of a component of the business resulted in a $2010000 loss. The effect of these events and transactions on 2020 net income net of tax would be

(1) decrease for 94,720

(2) decrease for 81,360

(3) decrease for 121,520

(4) decrease for 402,000

Total decrease 699,600

Explanation:

We must calcualte the after-tax amount.

(1) As this is an expense ist provides a tax shield, lowering the expense after-tax:

118,400 x (1 - 0.2) = 94,720

(2) also a loss whch has a tax shield:

101,700 x (1 - 0.2) = 81,360

(3) an overstated inventory for 151,900 generate a loss for holding assets.

After tax: 151,900 x (1 - 0.2) = 121,520

(4) loss at dispossal: 2,010,000

2,010,000 x (1 - 0.2)) = 402,000