Question

Company B discontinued one of its divisions. The division had a loss of $40,000 during the year and it was sold at a loss of $22,500 (both net of tax). The tax rate is 35%. Income from continuing operations was $68,500. What is the company's net income?

$6,000

($17,975)

$3,900

$85,150

Answer 1

Company B's net income after discontinuing a division and income from continuing operations of $68,500, with losses from the division and sale totaling $62,500, is $6,000.

Step-by-step explanation:

The student asked how to calculate Company B's net income after discontinuing a division. Company B's income from continuing operations is $68,500. They also faced a loss of $40,000 from the division and a loss on sale of $22,500. Both losses are stated net of tax, so no additional tax adjustments are necessary.

First, we combine the income from continuing operations with the losses:

• Income from continuing operations: $68,500
• Loss from discontinued division: -$40,000
• Loss on sale of division: -$22,500

Adding these figures together gives us the net income:

$68,500 (income from continuing operations) + -$40,000 (loss from division) + -$22,500 (loss on sale) = $6,000 (net income).

Therefore, the company's net income is $6,000.

Answer 2

Company B's net income is calculated by subtracting the losses from the discontinued division's operations and the loss from the sale of the division from the income of continuing operations, resulting in a net income of $6,000.

Step-by-step explanation:

To determine Company B's net income, we need to consider both the income from continuing operations and the results from the discontinued division. The loss from the division's operations ($40,000) and the loss on the sale of the division ($22,500) both need to be subtracted from the income from continuing operations ($68,500).

So, the calculation for net income is as follows:

Net Income = Income from Continuing Operations - (Loss from Division's Operations + Loss on Sale of Division)
Net Income = $68,500 - ($40,000 + $22,500)
Net Income = $68,500 - $62,500
Net Income = $6,000

Therefore, the Company B's net income is $6,000 after considering all factors.