Evers, Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $360,000 loss in the year of disposal. The loss on disposal of the segment was $180,000. If the tax rate is 30%, and income before income taxes was $2,250,000,

Question

Quizplus · Accepted Answer

To calculate the income from continuing operations, we need to subtract the loss from discontinued operations ($180,000) and the income tax expense on that loss ($54,000) from the income before income taxes. 
$2,250,000 - $180,000 - $54,000 = $2,016,000 
Then, to calculate net income, we add back the income tax expense on the income before discontinued operations: 
$2,016,000 + $513,000 = $2,529,000 
Therefore, the correct answer is B - the income from continuing operations is $1,575,000.