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Reporting Discontinued OperationsDisposal in Subsequent Year

On October 1, 2020, Blain Company approved a formal plan to sell the McKay Division, considered a component of the business. The sale will occur on March 31, 2021. The division had operating income of $500,000 (pretax) for the year ended December 31, 2020, but expects to incur an operating loss of $100,000 for the first quarter of 2021. Blain determines the carrying value and fair value (net of selling costs) of the McKay Division to be $5,000,000 and $4,800,000, respectively, on December 31, 2020. Blains tax rate for 2020 is 25%. Weighted average number of common shares outstanding in 2020 is 300,000.

Required

a. Assume Blain Companys income from continuing operations is $2,300,000. Prepare a partial income statement beginning with income from continuing operations. Include earnings per share disclosures.

• Use a negative sign to indicate a loss.
• Round the per share amounts to two decimal places.

?				?
Discontinued operations
?				?
Impairment loss on discontinued component, net of tax savings				?
?				?
Per share:
				?
				?
Impairment loss on discontinued, component, net of tax savings				?
				?

answer options:

Gain on disposal of discontinued component, net of tax

Income before income taxes

Income from continuing operations

Income from discontinued component, net of tax

Income tax expense

Loss from continuing operations

Loss from discontinued component, net of tax savings

Loss on disposal of discontinued component, net of tax savings

Net income

Use a negative sign to indicate a loss.b. How does the answer to part a change if the fair value of the McKay Divisions net assets were $5,200,000 instead of $4,800,000 on December 31, 2020?

• Round the per share amounts to two decimal places.

?				?
Discontinued operations
?				?
Impairment loss on discontinued component, net of tax savings				?
?				?
Per share:
?				?
?				?
Impairment loss on discontinued, component, net of tax savings				?
?				?

answer options:

Gain on disposal of discontinued component, net of tax

Income before income taxes

Income from continuing operations

Income from discontinued component, net of tax

Income tax expense

Loss from continuing operations

Loss from discontinued component, net of tax savings

Loss on disposal of discontinued component, net of tax savings

Net income

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