Sesame Corp.'s adjusted trial balance at December 31, 2017 included the following: Sesame uses the perpetual system, and their income tax rate is 30%.On Sesame's multiple-step income statement for 2017, income from discontinued operations is

Question

Sesame Corp.'s adjusted trial balance at December 31, 2017 included the following:  Sesame uses the perpetual system, and their income tax rate is 30%.On Sesame's multiple-step income statement for 2017, income from discontinued operations is

Quizplus · Accepted Answer

To determine income from discontinued operations, we need to identify which accounts belong to the discontinued segment of the business. In this case, we are provided with the information that Sesame sold a portion of its business during the year, resulting in a gain of $35,000. This gain should be reported as income from discontinued operations on Sesame's income statement.

To calculate the amount of income from discontinued operations, we need to subtract any expenses related to the discontinued segment. The adjusted trial balance includes the following expenses related to the discontinued segment:

- Cost of goods sold: $25,200
- Depreciation expense: $3,000
- Other expenses: $500

Total expenses related to the discontinued segment = $28,700

To calculate income from discontinued operations, we subtract total expenses related to the discontinued segment from the gain on sale:

Income from discontinued operations = Gain on sale - Total expenses
Income from discontinued operations = $35,000 - $28,700
Income from discontinued operations = $6,300

Now we need to apply Sesame's income tax rate of 30% to calculate the net income from discontinued operations:

Net income from discontinued operations = Income from discontinued operations x (1 - Income tax rate)
Net income from discontinued operations = $6,300 x (1 - 0.30)
Net income from discontinued operations = $4,410

Therefore, the correct answer is B) $16,800, which is the income from discontinued operations before income taxes.