When a company makes a second quarter decision to discontinue a segment, the first quarter tax expense:
A) Results are not restated.
B) is split between the tax expense calculated on restated quarter one income from continuing operations and the discontinued segment by subtracting the tax expenses calculated on the restated first quarter income from the original tax expense calculated for the first quarter, before the decision was made.
C) is used to determine the incremental tax effect.
D) is used to calculate the effective tax rate for the discontinued segment.

Question

Quizplus · Accepted Answer

When a company makes a second quarter decision to discontinue a segment, the first quarter tax expense is split between the tax expense calculated on restated quarter one income from continuing operations and the discontinued segment by subtracting the tax expenses calculated on the restated first quarter income from the original tax expense calculated for the first quarter, before the decision was made. This is because the decision to discontinue the segment impacts the tax expense for the first quarter as well.

When a Company Makes a Second Quarter Decision to Discontinue