Question

On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for $80 million. The sale was completed on December 31, 2016.

The following additional facts pertain to the transaction:

• The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations.
• The book value of Footwear's assets totaled $48 million on the date of the sale.
• Footwear's operating income was a pre-tax loss of $10 million in 2016.
• Foxtrot's income tax rate is 40%.

In the 2016 income statement for Foxtrot Co., it would report income from discontinued operations of:

Answer 1

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Footwear's Gain on Sale	80-48		$    32.00	million
Less: Pre tax loss from Footwear			$    10.00	million
Net Income pretax			$    22.00	million
Less Tax 40%			$       8.80	million
Income from discontinued operations			$    13.20	million