6．A firm has reported net income of $136 million, but the notes to financial statements includes a statement that the results “include a $27 million charge for non-insured earthquake damage” and a “gain on the sale of certain assets during restructuring of $16 million.” If we assume that both of these items are given on a pre-tax basis and the effective tax rate is 36 percent, what would be the “normal operating income?”

A)   $94.08 million.

B)   $139.96 million.

C)   $143.04 million.

D)   $147.00 million.

7．North American Pipelines (NAP) reports the following information in its 2006 financial statements and disclosures (in $millions):

What is NAP’s comprehensive income for 2006?

A)   $261 million.

B)   $476 million.

C)   $63 million.

D)   $278 million.

8．A firm has entered into a long-term operating lease on its manufacturing equipment that calls for payments of $100,000 per month over five years. At the end of the first full year, the income statement includes $1.2 million as lease expense. An analyst wishes to adjust the income statement to reflect this as a capital lease. Assuming no residual value in the equipment after the lease term, and a 10 percent interest rate, what income statements entries would be made for the lease during the first year (assume that the $1.2 million in expense has already been removed, and assets are depreciated using a straight-line method)?

A)   Interest expense $436,279 and depreciation $736,721.

B)   Lease expense $600,000 and depreciation $600,000.

C)   Interest expense $470,654 and depreciation $941,307.

D)   Interest expense $120,000 and amortization $1.08 million.