When a company makes a second quarter decision to discontinue a segment, the first quarter tax expense:
A)Results are not restated.
B)is split between the tax expense calculated on restated quarter one income from continuing operations and the discontinued segment by subtracting the tax expenses calculated on the restated first quarter income from the original tax expense calculated for the first quarter, before the decision was made.
C)is used to determine the incremental tax effect.
D)is recalculated using a new tax rate and first period results are restated.

Question

When a company makes a second quarter decision to discontinue a segment, the first quarter tax expense:
A)​Results are not restated.
B)​is split between the tax expense calculated on restated quarter one income from continuing operations and the discontinued segment by subtracting the tax expenses calculated on the restated first quarter income from the original tax expense calculated for the first quarter, before the decision was made.
C)​is used to determine the incremental tax effect.
D)​is recalculated using a new tax rate and first period results are restated.

Quizplus · Accepted Answer

When a company decides to discontinue a segment in the second quarter, the first quarter tax expense is restated to reflect the impact of the decision. The tax expense calculated on the restated first quarter income from continuing operations and the discontinued segment is determined by subtracting the tax expenses calculated on the restated first quarter income from the original tax expense calculated for the first quarter, before the decision was made. This ensures that the tax effect of the discontinued segment is accounted for properly.

When a Company Makes a Second Quarter Decision to Discontinue