Question
On September 1, 2012, Ramos Inc. approved a plan to dispose of a segment of its business. Ramos expected that the sale would occur on
On September 1, 2012, Ramos Inc. approved a plan to dispose of a segment of its business. Ramos expected that the sale would occur on March 31, 2013, at an estimated gain of $375,500. The segment had actual and estimated operating profits (losses as follows):
Please prepare answers to the following questions. Assume a marginal tax rate of 35%.
Realized loss from 1/1/12 to 8/31/12 .... $ 200,000
Realized loss from 9/1/12 to 12/31/12 ...$ 135,000
Expected profit from 1/1/13 to 3/31/13. .... $ 475,000
a. What should Ramos report as profit or loss from discontinued operations (net of tax effects) in its 2012 income statement?
b. Calculate the amount of income that should be shown on the 2013 income statement as a result of the operating profit and the gain on disposal (net of tax).
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