Homework Answers
Income statement
| Income before tax | 700 |
| Income tax expense | -245 |
| Income from continuing operations | 455 |
| Discontinued operation : | |
| Gain on disposal of segment (Net of tax) | 13 |
| Gain on operation segment (Net of tax) | 32.5 |
| Net income | $500.5 |
Book value of segment = $100 million
Sale price of segment = $120 million
Gain on sale of segment = Sale price of segment - Book value of segment
= 120 - 100
= $20 million
Tax on gain on sale of segment = 20 x 35%
= $7 million
Gain on disposal of segment (net of tax) = Gain on sale of segment - Tax on gain on sale of segment
= 20 - 7
= $13 million
Revenue from discontinued segment = $200 million
Expenses on discontinued segment = $150 million
Gain on operation of discontinued segment = Revenue from discontinued segment - Expenses on discontinued segment
= 200 - 150
= $50 million
Tax on gain on operation of discontinued segment = 50 x 35%
= $17.5 million
Gain on operation of discontinued segment, net of tax = Gain on operation of discontinued segment - Tax on gain on operation of discontinued segment
= 50 - 17.5
= $32.5 million
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