Leigh Corp. disposed of its Knit Products Division in June at a loss of $38,000 before tax. Prior to the sale, the Knit Products Division (considered a separate business component) reported a net loss from operations of $405,000 before tax. Leigh Corp. reported income from continuing operations of $900,000 before tax for the year.

a. Assuming an income tax rate of 25%, prepare an income statement beginning with Income from Continuing Operations. Ignore earnings per share disclosures.

• Use a negative sign to indicate a loss.

Leigh Corp.Income StatementJuneIncome from continuing operations Discontinued operationsLoss from discontinued operations, net of tax savings Loss on disposal of discontinued operations, net of tax savings Net income

b. Repeat the requirements of part a but now assume that the Knit Products Division reported income from operations of $80,000 for the year.

• Use a negative sign to indicate a loss.

Leigh Corp.Income StatementJuneIncome from continuing operations Discontinued operationsIncome from discontinued operations, net of tax Loss on disposal of discontinued operations, net of tax savings Net income