On October 1, 2017 LeBron Co. agreed to sell the assets of its Heat Division to Cavalier Inc. for $80 million. The sale was completed on December 31, 2017. The following additional facts pertain to the transaction:
The Heat Division qualifies as a component of the entity according to GAAP regarding discontinued operations.
The book value of Heat's assets totaled $74 million on the date of the sale.
Heat's operating income was a pre-tax loss of $3.5 million in 2017.
LeBron's income tax rate is 30%.
17. In the 2017 income statement for LeBron Co., it would report income (loss) from discontinued operations of:
Operating Loss | $ (3,500,000.00) |
Gain on Disposal(80-74) | $ 6,000,000.00 |
Income from Discontinuing Opearions | $ 2,500,000.00 |
Tax @ 30% | $ (750,000.00) |
Income after from Discontinuing Opearions | $ 1,750,000.00 |
So, the LeBron Co. would report the gain of $ 1.75 million from discontinued operations.
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