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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%.
-Spectrum Corporation's net income for 2010 is:
A)$14,213,500
B)$22,925,000
C)$23,128,300
D)$23,256,700

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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%.
-Spectrum Corporation's net income for 2010 is:
A)$14,213,500
B)$22,925,000
C)$23,128,300
D)$23,256,700

Quizplus · Accepted Answer

To calculate the net income for 2010, we need to first calculate the income from discontinued operations.
Income from discontinued operations = (gain on sale - taxes on gain) - (pre-tax loss - taxes on loss)
= ($235,000 - 0.38*$235,000) - ($770,000 - 0.38*$770,000)
= $23,300
Therefore, the net income for 2010 is:
Net income = Income from continuing operations + Income from discontinued operations
= $23,460,000 + $23,300
= $23,483,300
The closest option to this calculation is C) $23,128,300.

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