Question

On December 31, 2021, the end of the fiscal year, the Wainwright Corporation completed the sale of its cosmetics line of business for $1,000,000. The cosmetics business segment qualifies as a component of the entity according to GAAP. The book value of those assets equals $800,000. The component generated operating loss of $600,000 for the year. The income tax rate is 25%. In its income statement for the year ended December 31, 2021, for what amount would the company report income (loss) from operations of a discontinued component?

a.Income from discontinued operations $150,000.

b.Loss from discontinued operations $(200,000).

c.Loss from discontinued operations $(300,000).

d.Loss from discontinued operations $(400,000).

Answer 1

Income/ loss from operations of a discontinued component:

Particulars	Amount
Income from disposal of cosmetic line of business ( 1000000-800000)	200000
Operating losses from discontinued component	(600000)
Net income/(loss)	(400000)
Tax benefit from discontinued cosmetic line (400000*25/100)	100000
Net income/(loss) from discontinued operation	(300000)

C. Loss from discontinued operations $(300000)

Thank you