On May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021. Jazzie’s year ends on December 31st. The following additional facts pertain to the transaction: The Mister Division qualifies as a component of an entity as defined by GAAP. Mister's net assets totaled $48 million on Jazzie's books at the time of the sale. Mister incurred a pre-tax operating loss of $10 million in 2021. Jazzie’s income tax rate is 40%. Suppose that the Mister Division's assets had not been sold by December 31, 2021, but were considered held for sale. Assume that the fair value of these assets at December 31 was $40 million. In their 2021 income statement, Jazzie Co. would report for discontinued operations: Group of answer choices a $6 million after tax loss. a $10 million after tax loss. a $10.8 million after tax loss. an $18 million after tax loss.
On May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021. Jazzie’s year ends on December 31st. The following additional facts pertain to the transaction: The Mister Division qualifies as a component of an entity as defined by GAAP. Mister's net assets totaled $48 million on Jazzie's books at the time of the sale. Mister incurred a pre-tax operating loss of $10 million in 2021. Jazzie’s income tax rate is 40%. Suppose that the Mister Division's assets had not been sold by December 31, 2021, but were considered held for sale. Assume that the fair value of these assets at December 31 was $40 million. In their 2021 income statement, Jazzie Co. would report for discontinued operations: Group of answer choices a $6 million after tax loss. a $10 million after tax loss. a $10.8 million after tax loss. an $18 million after tax loss.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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On May 1, 2021, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2021. Jazzie’s year ends on December 31st. The following additional facts pertain to the transaction:
- The Mister Division qualifies as a component of an entity as defined by GAAP.
- Mister's net assets totaled $48 million on Jazzie's books at the time of the sale.
- Mister incurred a pre-tax operating loss of $10 million in 2021.
- Jazzie’s income tax rate is 40%.
Suppose that the Mister Division's assets had not been sold by December 31, 2021, but were considered held for sale. Assume that the fair value of these assets at December 31 was $40 million. In their 2021 income statement, Jazzie Co. would report for discontinued operations:
Group of answer choices
a $6 million after tax loss.
a $10 million after tax loss.
a $10.8 million after tax loss.
an $18 million after tax loss.
Expert Solution
Step 1
|
Particulars |
Amount in Millions |
|
a) Pre-tax loss from discontinued operations |
(10) |
|
b) Loss from Disposal (48 - 40) |
(8) |
|
c) Total loss from discontinued operations (a + b) |
(18) |
|
d) Income tax benefit (d x 40%) |
7.2 |
|
e) Net income from discontinued operations (c + d) |
(10.8) |
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