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Spectrum Corporation sold its Specialties Division during 2010. The company's accountants determined that the division had a pre-tax loss $770,000 during 2010 prior to disposal. The sale resulted in a $235,000 gain before taxes. The company had neither extraordinary items nor any cumulative accounting adjustments. Spectrum's income from continuing operations for 2010 amounted to $23,460,000. The company's effective tax rate is 38%.
-The amount of loss from operations of the Specialties Division that would appear on the 2010 income statement of Spectrum Corporation is:
A)$770,000
B)$477,400
C)$331,700
D)$292,600

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Spectrum Corporation sold its Specialties Division during 2010. The company's accountants determined that the division had a pre-tax loss $770,000 during 2010 prior to disposal. The sale resulted in a $235,000 gain before taxes. The company had neither extraordinary items nor any cumulative accounting adjustments. Spectrum's income from continuing operations for 2010 amounted to $23,460,000. The company's effective tax rate is 38%.
-The amount of loss from operations of the Specialties Division that would appear on the 2010 income statement of Spectrum Corporation is:
A)$770,000
B)$477,400
C)$331,700
D)$292,600

Quizplus · Accepted Answer

The loss from operations of the Specialties Division is $770,000 before taxes. To find the after-tax loss, multiply the pre-tax loss by (1 - tax rate): $770,000 * (1 - 0.38) = $770,000 * 0.62 = $477,400.

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