Reporting Discontinued Operations

Leigh Corp. disposed of its Knit Products Division in June at a loss of $$114,000$ before tax. Prior to the sale, the Knit Products Division $($considered a separate business component$)$ reported a net loss from operations of $$1,215,000$ before tax. Leigh Corp. reported income from continuing operations of $$2,700,000$ 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 Statement

June

Income from continuing operations Answer

$0$

Discontinued operations

Loss from discontinued operations, net of tax savings Answer

$0$

Loss on disposal of discontinued operations, net of tax savings Answer

$0$

Net income Answer

$0$

b$.$ Repeat the requirements of part a but now assume that the Knit Products Division reported income from operations of $$240,000$ for the year.

Use a negative sign to indicate a loss.

Leigh Corp.

Income Statement

June

Income from continuing operations Answer

$0$

Discontinued operations

Income from discontinued operations, net of tax Answer

$0$

Loss on disposal of discontinued operations, net of tax savings Answer

$0$

Net income Answer

$0$