Lupton Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $160,000 loss in the year of disposal. The loss on disposal of the segment was $80,000. If the tax rate is 30%, and income before income taxes was $1,300,000,
A) the income tax expense on the income before discontinued operations is $318,000.
B) the income from continuing operations is $910,000.
C) net income is $1,060,000.
D) the losses from discontinued operations are reported net of income taxes at $240,000.

Question

Quizplus · Accepted Answer

The income from continuing operations is calculated as income before income taxes minus the income tax expense on continuing operations. The income tax expense on the income before discontinued operations is $1,300,000 * 30% = $390,000. Therefore, the income from continuing operations is $1,300,000 - $390,000 = $910,000.