Question

Dangerous Mix Inc. adopted a formal plan to sell the division. The sale was completed on April 30, 2019. On December 21, 2019, the component was sold for $150,000. On the date of sale, the book value of the assets of the pesticides division $400,000. The before-tax loss from operations of the division for the year was $200,000. The company's effective tax rate is 50%. The income from continuing operations before income tax (excluding restructuring costs as a result of the discontinued component) for 2019 was $1,000,000. The company incurred restructuring costs of $100,000 as a result of the retirement of the discontinued component.

Beginning with a corrected income from continuing operations before income tax, provide the rest of the balance sheet, ending with the net income of the firm.

Answer 1

	Income Statement :-
		Amount (in $)
	Income from continuing operations before tax	10,00,000
	Less: Non-operating expenses
	Restructuring costs	-1,00,000
	Net Profit from continuing operations before tax	9,00,000
	Less: Tax expense @50%	-4,50,000
	Profit after tax from continuing operations (A)	4,50,000
	Discontinued operations:-
	Before tax loss from discontinuing operations	-2,00,000
	Loss on disposal of asset	-2,50,000
	( 150,000 - 400,000)
	Net loss from discontinuing operations before tax	-4,50,000
	Add: Tax Benefit @50%	2,25,000
	(450,000 x 50)%
	Net loss from discontinuing operations after tax (B)	-2,25,000
	Net Income (A+B)	2,25,000