On December 31, 2018, the end of the fiscal year, California Microtech Corporati

Question

On December 31, 2018, the end of the fiscal year, California Microtech Corporation completed the sale of its semiconductor business for $12 million. The business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $10 million. The loss from operations of the segment during 2018 was $3.5 million. Pretax income from continuing operations for the year totaled $7.1 million. The income tax rate is 35%. Prepare the lower portion of the 2018 income statement beginning with pretax income from continuing operations. Ignore EPS disclosures. (Amounts to be deducted and negative amounts should be indicated with a minus sign. Enter your answers in whole dollars.) CALIFORNIA MICROTECH CORPORATION Partial Income Statement For the Year Ended December 31, 2018 Income from continuing operations before income taxes Discontinued operations

Explanation / Answer

SOLUTION

CALIFORNIA MICROTECH CORPORATION

Partial Income Statement

For the Year Ended December 31, 2018

*Loss from operations of discontinued component

Amount ($) Income from continuing operations before income taxes 7,100,000 Income tax expense (35%) (2,485,000) Income from continuing operations 4,615,000 Discontinued operations:   Loss from operations of discontinued component* (1,500,000)   Income tax benefit (35%) 525,000 Loss on discontinued operations (975,000) Net income 3,640,000

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