Question

On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for $80 million. The sale was completed on December 31, 2021. The following additional facts pertain to the transaction:
The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations.
The book value of Footwear's assets totaled $48 million on the date of the sale.
Footwear's operating income was a pre-tax loss of $10 million in 2021.
Foxtrot's income tax rate is 25%.
In the income statement for the year ended December 31, 2021, Foxtrot Co. would report:______.
A. Income taxes separated for continuing and discontinued operations.
B. Income taxes reported for income and gains only.
C. All income taxes combined into one line item.
D. None of these answer choices are correct.

Answer 1

Answer: Income taxes separated for continuing and discontinued operations

Explanation:

the income statement for the year ended December 31, 2021, Foxtrot Co. would report income taxes separated for continuing and discontinued operations.

Discontinued operations are a segment of the core business of a company which has been shut down or in certain situations divested and are separately reported on the income statement of the company from the continuing operations.

The reason why discontinued operations have to be listed separately is to enable investors to differentiate between profits from continuing operations and the activities that aren't functioning anymore.