Question
On May 1, 2019, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed
On May 1, 2019, Jazzie Co. agreed to sell the assets of its Mister Division to Shawna Inc. for $80 million. The sale was completed on December 31, 2019. Jazzie's year ends on December 31st. The following additional facts pertain to the transaction:
The Mister Division qualifies as a component of an entity as defined by GAAP.
Mister's net assets totaled $48 million on Jazzie's books at the time of the sale.
Mister incurred a pre-tax operating loss of $10 million in 2019.
Jazzie's income tax rate is 40%.
Suppose that the Mister Division's assets had not been sold by December 31, 2019, but were considered held for sale. Assume that the fair value of these assets at December 31 was $40 million. In their 2019 income statement, Jazzie Co. would report for discontinued operations:
A) a $6 million after tax loss.
B) a $10 million after tax loss.
C) a $10.8 million after tax loss.
D) an $18 million after tax loss.
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