If a company has a discontinued operation gain of $30,000 and a 32% tax rate, what is the effect on net income?
A) Increase of $30,000.
B) Increase of $20,400.
C) Increase of $9,600.
D) No effect.

Question

Quizplus · Accepted Answer

To calculate the effect on net income, we need to first calculate the tax expense related to the gain:

$30,000 x 32% = $9,600

The net income will increase by the difference between the gain and tax expense:

$30,000 - $9,600 = $20,400

Therefore, the correct answer is B, Increase of $20,400.

If a Company Has a Discontinued Operation Gain of $30,000