Question

On December 31, 2018, the end of the fiscal year, California Microtech Corporation completed the sale of its semiconductor business for $17 million. The business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $16 million. The loss from operations of the segment during 2018 was $4.6 million. Pretax income from continuing operations for the year totaled $6.7 million. The income tax rate is 30%. Prepare the lower portion of the 2018 income statement beginning with pretax income from continuing operations. Ignore EPS disclosures. (Amounts to be deducted and negative amounts should be indicated with a minus sign. Enter your answers in whole dollars.)

Answer 1

Income from continuing operations before tax		$6.7 million
Income tax expense ($6.7 × 30%)		($2.01 million)
Income from continuing operations		$4.69 million
Discontinued operations, net of tax:
Loss from operations of discontinued segment ($4.6 × 70%)	($3.22 million)
Gain on sale of discontinued operations [($17 -$16) ×70%]	$0.7 million
Loss on discontinued operations		($2.52 million)
Net income ($4.69 - $2.52)		$2.17 million

Note:- 100 - 30% =70%