5. On May 1, Tango Co. agreed to sell the assets of its Formal Wear Division to Top Hat Inc. The following additional facts pertain to the transaction: The Formal Wear Division qualifies as a component of the entity according to GAAP regarding discontinued operations. The book value of Formal Wear's assets totaled $48 million on December 31, 2021. Formal Wear's operating income was a pre-tax loss of $10 million in 2021. Tango's income tax rate is 25%. Suppose that the Formal Wear Division's assets had not been sold by December 31, 2021. but were considered held for sale. Assume that the fair value of these assets was $80 million at December 31, 2021. In the income statement for the year ended December 31, 2021, Tango Co., would report discontinued operations of a: A) $7.5 million loss. B) $10.0 million loss. C $16.5 million income. DJ None of these answer choices are correct. 6. Howard Co.'s 2021 income from continuing operations before income taxes was $280,000. Howard Co. reported before-tax income on discontinued operations of $60,000. All tax items are subject to a 25% tax rate. In its income statement for 2021, Howard Co. would show the following line-item amounts for income tax expense and net income: A) $70,000 and $255,000 respectively. B) $55,000 and $220,000 respectively. C) $85,000 and $340,000 respectively. D) $85,000 and $255,000 respectively. 7. Companies recognize revenue only when: A) A contract is reasonably likely to exist. B) A performance obligation is designated in a written contract. C) A written contract is in place and payment is variable. D) Control over goods or services has been transferred from the seller to the customer