The board of directors of Junction Electronics (JE), a large manufacturer, approved a plan to sell its eastern division at a board meeting on 30 October 20X2. The division is a cash-generating unit of JE. JE engaged a professional service firm to appraise the fair value of the divisions assets, and solicited competitive bids from prospective buyers for the division. JE will use the firm to assist with the bidding and selling process. On 31 December 20X2, the following information is available:

From 1 January 20X2 through 30 October 20X2, the division earned $3.1 million before tax.

From 31 October 20X2 through 31 December 20X2, the division earned an additional $0.85 million before tax.

The evaluators estimate that the fair value less costs to sell of the divisions net assets is $26.5 million. The divisions carrying value is $28 million in JEs books.

The bidding process closes on 15 January 20X3. Final negotiations and preparation for sale are expected to extend until March or April, after which date LE expects to have no continued interest in the division.

JE managers estimate that due to uncertainty surrounding the fate of the division, the division will probably lose $1.8 million between 1 January 20X3 and the closing date of the sale.

JE will have to pay a 5% commission to the professional services firm.

JE has a tax rate of 25%.

Required:

Calculate the gain (loss) to be reported for this discontinued operation. (Negative amounts should be entered with a minus sign.)

Earnings from Operations for 20X2:

Adjustment to CV of the assets:

commission:

income tax expense:

total gain (loss) on discontinued operations: