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On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for $80 million. The sale was completed on December 31, 2016. The following additional facts pertain to the transaction: • The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations. • The book value of Footwear's assets totaled $48 million on the date of the sale. • Footwear's operating income was a pre-tax loss of $10 million in 2016. • Foxtrot's income tax rate is 40%. In the 2016 income statement for Foxtrot Co., it would report income from discontinued operations of:
A. $9.2 million.
B. $13.2 million.
C. $22 million.
D. $26 million

Respuesta :

Answer:

B. $13.2 million.

Explanation:

The computation of the income from discontinued operations is shown below:

=  (Sale value of assets -  book value of asset - per tax loss) × (1 - income tax rate)

= ($80 million - $48 million - $10 million) × (1 - 0.40%)

= $22 million × 0.6%

= $13.2 million

Gain from the sale of assets = (Sale value of assets -  book value of asset)

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