Question

Consider the following:

ACorp has the following:

Earnings from Continuing Operations   $2,300,000
Loss from Discontinued Operations   $(1,800,000)
Net Operating Loss Carryforward of $4,000,000 that has a 100% Valuation Allowance
Tax Rate is 21%

1. Calculate the income tax expense/benefit for both Continuing and Discontinued operations.
2. Assume no net operating loss carryforward and calculate the income tax expense/benefit for both Continuing and Discontinued operations

Answer 1

A.

Income from continuing operations	2,300,000
Income tax expense [2,300,000 *21%]	483000
Less: Loss carryforward [4,000,000*21%]	840,000
Net Income tax expense	0
Discontinued operations
Loss from operations of discontinued component	-1,800,000
Income tax benefit [1,800,000 *25%]	378,000.00

Income from continuing operations	2,300,000
Income tax expense [2,300,000 *21%]	483000
Discontinued operations
Loss from operations of discontinued component	-1,800,000
Income tax benefit [1,800,000 *25%]	378,000.00