Queen Corporation decided to sell its furniture business segment for $400,000, on September 1, Year 1, which is also the disposal date. The book value of the segment's net assets is $500,000 on this date. The pre-tax income for the segment for the period January 1 - September 1, Year 1, was $150,000. Assuming a tax rate of 40%, choose the correct reporting for discontinued operations in the income statement of Queen Corporation, for the year ended December 31, Year 1. $$\begin{array} { | l | l | }
\hline& \text { Income (loss) from Discontinued operations } & \text { Gain (loss) from disposal of ciscontinued operations } \
\hline 1& \$ 90,000 & \$ \$ 60,000 ) \
\hline 2& \$ 150,000 & \$ 100,000 ) \
\hline 3& \$ 30,000 & \$ 0 \
\hline 4& \$ 0 & \$ 30,000 \
\hline
\end{array}$$

Question

Queen Corporation decided to sell its furniture business segment for $400,000, on September 1, Year 1, which is also the disposal date. The book value of the segment's net assets is $500,000 on this date. The pre-tax income for the segment for the period January 1 - September 1, Year 1, was $150,000. Assuming a tax rate of 40%, choose the correct reporting for discontinued operations in the income statement of Queen Corporation, for the year ended December 31, Year 1. $$\begin{array} { | l | l | } 
\hline& \text { Income (loss) from Discontinued operations } & \text { Gain (loss) from disposal of ciscontinued operations } \
\hline 1& \$ 90,000 & \$ \$ 60,000 ) \
\hline 2& \$ 150,000 & \$ 100,000 ) \
\hline 3& \$ 30,000 & \$ 0 \
\hline 4& \$ 0 & \$ 30,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The pre-tax income from discontinued operations is $150,000, and after a 40% tax, it becomes $90,000. The loss from disposal is $500,000 (book value) - $400,000 (sale price) = $100,000. After a 40% tax benefit, the loss is $60,000.

Queen Corporation Decided to Sell Its Furniture Business Segment for $400,000