Maynes Limited reported the following information (in thousands) for 20X6 and 20X7:

Mayne's income tax rate is \(35 \%\). The 20X6 unusual gain is not taxable until 20X7. The 20X7 gain on discontinued operations is fully taxable in \(20 \mathrm{X} 7\).

Required:

1. Prepare a partial statement of profit and loss in good form for \(20 X 6\) and 20X7, starting with "Income from continuing operations, before unusual item and discontinued operations, and income tax," using two different methods:

a. Taxes payable method.

b. Comprehensive tax allocation.

2. Explain the circumstances under which Maynes Limited could use the taxes payable method.

Transcribed Image Text:

Income from continuing operations, before unusual item, discontinued operation, and income tax Unusual item-gain on sale of capital assets (before income tax) Gain from discontinued operations, before income tax 20X6 20X7 $300,000 $250,000 10,000 22,000