Reporting Discontinued Operations Leigh Corp, disposed of its Knit Products Division in June at a loss of $38,000 before tax. Prior to the sale, the Knit Products Division (considered a separate business component) reported a net loss from operations of $405,000 before tax. Leigh Corp. reported income from continuing operations of $900,000 before tax for the year. a. Assuming an income tax rate of 25%, prepare an income statement beginning with Income from Continuing Operations. Ignore earnings per share disclosures. • Use a negative sign to indicate a loss. Leigh Corp. Income Statement June Income from continuing operations Discontinued operations Loss from discontinued operations, net of tax savings Loss on disposal of discontinued operations, not of tax savings Net Income Leigh Corp. Income Statement June 6. Repeat the requirements of part a but now assume that the Knit Products Division reported income from operations of $80,000 for the year. • Use a negative sign to indicate a loss. Income from continuing operations Discontinued operations Income from discontinued operations, net of tex $ 675,000✔ Loss on disposal of discontinued operations, net of tax savings Net income (28,500) x (303,750 $342.750 60,000 x (28,500) x (303,750) $ 272,250) x
Reporting Discontinued Operations Leigh Corp, disposed of its Knit Products Division in June at a loss of $38,000 before tax. Prior to the sale, the Knit Products Division (considered a separate business component) reported a net loss from operations of $405,000 before tax. Leigh Corp. reported income from continuing operations of $900,000 before tax for the year. a. Assuming an income tax rate of 25%, prepare an income statement beginning with Income from Continuing Operations. Ignore earnings per share disclosures. • Use a negative sign to indicate a loss. Leigh Corp. Income Statement June Income from continuing operations Discontinued operations Loss from discontinued operations, net of tax savings Loss on disposal of discontinued operations, not of tax savings Net Income Leigh Corp. Income Statement June 6. Repeat the requirements of part a but now assume that the Knit Products Division reported income from operations of $80,000 for the year. • Use a negative sign to indicate a loss. Income from continuing operations Discontinued operations Income from discontinued operations, net of tex $ 675,000✔ Loss on disposal of discontinued operations, net of tax savings Net income (28,500) x (303,750 $342.750 60,000 x (28,500) x (303,750) $ 272,250) x
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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9
Transcribed Image Text:Reporting Discontinued Operations
Leigh Corp. disposed of its Knit Products Division in June at a loss of $38,000 before tax. Prior to the sale, the Knit Products Division (considered a separate business component) reported a net loss from
operations of $405,000 before tax. Leigh Corp. reported income from continuing operations of $900,000 before tax for the year.
a. Assuming an income tax rate of 25%, prepare an income statement beginning with Income from Continuing Operations. Ignore earnings per share disclosures
• Use a negative sign to indicate a loss.
Leigh Corp.
Income Statement
June
Income from continuing operations
Discontinued operations
Loss from discontinued operations, net of tax savings
Loss on disposal of discontinued operations, not of tax savings
Net Income
Leigh Corp.
Income Statement
June
Income from continuing operations
Discontinued operations
Income from discontinued operations, net of tax
$
b. Repeat the requirements of part a but now assume that the Knit Products Division reported income from operations of $80,000 for the year.
• Use a negative sign to indicate a loss.
Loss on disposal of discontinued operations, net of tax savings
Net income
675,000 ✓
128,500) *
(303,750) *
$ 342,750
5
60,000 x
(28,500) x
(303,750) *
5 (272,250) x
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