Net gain-loss on disposal from discontinued component

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Reference no: EM131257386

On July 4, Y2, ABC Inc. sold a component of their business to XYZ Inc. for $705,000. ABC determined the component would be discontinued in Y1 and properly reported the component in the discontinued operations section of the income statement. At 12/31/Y1, ABC estimated the fair value less cost to sell of the component to be $675,000, while the book value was $775,000. The pre-tax income of the component from January 1 - December 31 Y1 was $40,000.

During Y2, ABC had a pre-tax operating loss of $50,000 for the component. ABC is subject to a 40% income tax rate. Note: Use () to show a loss in your answer, if applicable.

1) Determine the net income/(loss) on operations from the discontinued component as of December 31, Y2:

2) Determine the net gain/loss on disposal from the discontinued component as of December 31, Y2:

Reference no: EM131257386

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