Question

Carol Corp. has a component that is a discontinued operation. The revenues and expenses of the component were $100,000 and $160,000, respectively. The component was sold with a resulting gain of $200,000. The tax rate is 40%. What is the total gain or loss on discontinued operations (net-of-tax effects) that will be reported on the income statement

Answer 1

Answer:

$84,000 gain

Explanation:

Carol Corp total gain or loss on discontinued operation

Revenues $100,000

Expenses $160,000

Components sold $200,000

Hence:

$100,000-$160,000+$200,000

= $140,000

$140,000 * net of tax 60%

= $84,000 gain

The tax rate of 40%

100%-40%=60% as the net tax rate