Splish Brothers Inc. disposes of an unprofitable segment of its business. The op

Question

Splish Brothers Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $219000 loss in the year of disposal. The loss on disposal of the segment was $ 119000, if the tax rate is 31%, and income before income taxes was $ 1619000, the income from continuing operations is $1117110 net income is $1281000. the income tax expense on the income before discontinued operations is $ 442780. the losses from discontinued operations are reported net of income taxes at $ 338000.

Explanation / Answer

CALCULATION OF THE NET LOSS FROM UNPROFITABLE SEGMENT Loss in the year of Disposal = $                2,19,000 Add: Loss on Disposal of segment $                1,19,000 Net Loss from unprofitable segment $                3,38,000 CALCUALTION OF NET INCOME AND INCOME TAX Income from Business = $              16,19,000 Less: Loss from Unprofitable segment / Discontinued Operation $                3,38,000 Net Taxable income $              12,81,000 Tax @ 31% = $                3,97,110 Net income after tAx $                8,83,890 So, Answer = Option 2 = Net Income = $ 1,281,000

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