Question

Information for Hobson Corp. for the current year ($ in millions): Income from continuing operations before tax $ 380 Loss on discontinued operation (pretax) 92 Temporary differences (all related to operating income): Accrued warranty expense in excess of expense included in operating income 85 Depreciation deducted on tax return in excess of depreciation expense 175 Permanent differences (all related to operating income): Nondeductible portion of entertainment expense 20 The applicable enacted tax rate for all periods is 25%. How should Hobson report tax on the discontinued operation

Answer 1

Answer:

$188

Explanation:

Income from continuing operations before tax  $380

Less: Income Tax Expenses                                 $100  [($380+$20)/25%]

Income from continuing operations                     $280

Less: Loss on discontinued operation (pretax)    $92

Income from discontinued operations               $188