BE14-15 On June 30, Reeves Corporation discontinued its operations in Mexico. Du

Question

BE14-15

On June 30, Reeves Corporation discontinued its operations in Mexico. During the year, the operating loss was $300,000 before taxes. On September 1, Reeves disposed of the Mexico facility at a pretax loss of $120,000. The applicable tax rate is 30%. Show the discontinued operations section of the income statement. (List amounts from largest to smallest e.g. 10, 5, 3, 2. List all numbers as positive numbers and subtract as necessary.)
REEVES CORPORATION
Partial Income Statement

Loss from operations of Mexico facilityLoss on disposal of Mexico facilityExtraordinary lossIncome tax expenseNet incomeIncome before income taxes $
Income tax expenseNet incomeLoss on disposal of Mexico facilityExtraordinary lossIncome before income taxesLoss from operations of Mexico facility
$

Explanation / Answer

Loss from operations of Mexico facility Net of Taxes ($300,000*(1-30%)) = $210,000 Loss on disposal of Mexico facility Net of Taxes ($120,000*(1-30%)) =$84,000 Extraordinary loss NIL Income tax expense NIL ----------------------------------------- Net income $294,000

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