29.) At December 31, 2016, Fast Feet Co. considered its Sock Division held for s

Question

29.) At December 31, 2016, Fast Feet Co. considered its Sock Division held for sale. The following additional facts pertain to the Company: . The Scok Division qualifies as a component of the entity according to GAAP regarding discontinued operations - The book value of Sock Division's assets totaled $48 million on the date of the sale . The Sock Division's operating income was a pre-tax loss of $10 million in 2016. Fast Feet Co.'s income tax rate is 40%. . The fair value of Sock Division assets at December 31 was $40 million. - On May 3, 2017, the Sock Division sold for $45 million. For the 2016 income statement for Fast Fee Co. calculate the income or loss reported from discontinued operations, net of tax.

Explanation / Answer

Answer:

Book Value of Discontinued Operations = $48 Million

Sale proceeds of Discontinued operations = $45 Million

Gain from Sale of Discontinued operations = $48 million - $45 million

Gain from Sale of Discontinued operations = $3 million

Gain from sale of Discontinued operations = $3 million - ($3 million *40%)

Gain from Sale of Discontinued operations = $1.8 million or $1,800,000

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