Question

On December 31, 2021, the end of the fiscal year, Revolutionary Industries completed the sale of its robotics business for $10.8 million, The robotics business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $7.9 million. The income from operations of the segment during 2021 was $4.9 million, Pretax income from continuing operations for the year totaled $12.9 million. The income tax rate is 25%. Prepare the lower portion of the 2021 income statement beginning with income from continuing operations before income taxes. Ignore EPS disclosures (Amounts to be deducted and negative amounts should be indicated with a minus sign. Enter your answers in whole dollars and not in millions. For example, $4,000,000 rather than $4.)

Answer 1

sale price of assets of discontinued division = $10,800,000

Book value of assets of discontinued division = $7,900,000

Gain on disposal of discontinued division = sale price of assets of discontinued division - Book value of assets of discontinued division

= 10,800,000-7,900,000

= $2,900,000

REVOLUTIONARY INDUSTRIES
Partial Income Statement
For the Year Ended December 31, 2021
Income from continuing operations before income taxes
Income before tax		12,900,000
Income tax expense (12,900,000 x 25%)		(3,225,000)
Income from continuing operations		9,675,000
Discontinued operations:
Gain on disposal of discontinued division net of tax (2,900,000 - 2,900,000 x 25%)	2,175,000
Gain on operation of discontinued business segment net of tax (4,900,000 - 4,900,000 x 25%)	3,675,000
Income from discontinued operation		5,850,000
Net income		$15,525,000

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