Beacon Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $350000 loss in the year of disposal. The loss on disposal of the segment was $150000. If the tax rate is 30% and income before income taxes was $2300000
A) the income tax expense on the income before discontinued operations is $540000.
B) the income from continuing operations is $1610000.
C) net income is $1800000.
D) the losses from discontinued operations are reported net of income taxes at $150000.

Question

Quizplus · Accepted Answer

First, we need to calculate the income tax expense on income before income taxes: 
Income before income taxes = $2,300,000
Income tax expense = 30% × $2,300,000 = $690,000

Next, we can calculate the income from continuing operations: 
Income from continuing operations = Income before income taxes - Discontinued operations - Income tax expense
Income from continuing operations = $2,300,000 - $0 - $690,000 = $1,610,000

Finally, we can calculate the net income: 
Net income = Income from continuing operations - Losses from discontinued operations - Income tax expense on discontinued operations
Net income = $1,610,000 - $150,000 - ($350,000 × 30%) = $1,735,000

Therefore, the correct choice is B: the income from continuing operations is $1,610,000.