On September 17, 2013, Ziltech, Inc. entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2013, the companys fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the divisions assets at the end of the year was $19 million. The pretax income from operations of the division during 2013 was $4 million. Pretax income from continuing operations for the year totaled $22 million. The income tax rate is 40%. Ziltech reported net income for the year of $8.7 million.

I keep coming up with an impairment loss of 11.5 million and the market value of 19 million for a book value of 30.5 million but it's wrong.

income from continuing ops before taxes 22mil

income tax expense (.40x22) 8.8mil

income from continuing ops 13.2 mil

income from operation of discontinued component 4.5/.60 = (7.5 mil)

operating income of discontinued segment 4 mil

+gain (loss) on disposal (11 mil)

=loss from operation of discontinued component (7.5 mil)

impairment loss 11.5 mil

EMV 19 mil

book value 30.5

income tax benefit (7.5x.4) 3 mil

loss on discontinued operations (13.2-8.7)4.5 mil

net income 8.7 mil