Question

Major Co. reported 2018 income of $302,000 from continuing operations before income taxes and a before-tax loss on discontinued operations of $68,000. All income is subject to a 36% tax rate. In the income statement for the year ended December 31, 2018, Major Co. would show the following line-item amounts for income tax expense and net income:

Multiple Choice

• $84,240 and $193,280 respectively.

• $84,240 and $370,000 respectively.

• $108,720 and $234,000 respectively.

• $108,720 and $149,760 respectively.

Answer 1

Income from Continuing operations before tax	302000
Income tax expense	108720	=302000*36%
Income from Continuing operations	193280
Less: After tax loss on discontinued operations	43520	=68000*(1-36%)
Net income	149760
Option D $108,720 and $149,760 respectively is correct