Division incurred before-tax operating losses

Reference no: EM13127589

Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2011, the company adopted a plan to sell the assets of the division. The actual sale was effected on December 15, 2011, at a price of $600,000. The book value of the division's assets was $1,000,000, resulting in a before-tax loss of $400,000 on the sale.

The division incurred before-tax operating losses of $130,000 from the beginning of the year through December 15.

The income tax rate is 40%. Chance's after-tax income from its continuing operations is $350,000.

Reference no: EM13127589

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