Question

On August 1, 2018, Juarez Corporation adopted a plan to discontinue its catalog sales division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by June 30, 2019, but had not yet occurred as of January 31, 2019. On January 31, 2019, Juarez's fiscal year-end, the following information relative to the discontinued division was provided: Operating loss Feb. 1, 2018 to Jan. 31, 2019 $425,000 Estimated operating losses, Feb. 1 to June 30, 2019 90,000 Excess of book value over fair value less cost to sale of assets, at Jan. 31, 2019 65,000 Juarez's income tax rate is 35%. In its income statement for the year ended January 31, 2019, Juarez would report income (loss) from discontinued operations of:

Answer 1

Answer:

$318,500

Explanation:

The question is to determine the income (loss) from discontinued opeartions that should be reported by Jarez in its income Statement for the yera ended January 31,209

First, we add the operating loss and impairment loss of assets (Feb 2018- Jan 2019)

= $425,000 + $65, 000 (excess of book value over fair value less cost to sale of assets)

= $490,000

Secondly, we subtract the tax savings for the period

$490,000 - 35% - given tax rate is 35%

= $490,000 -$171,500

= $318,500