Q: 4
On December 31, 20X2, the Board of Directors of Maxy Manufacturing, Inc. committed to a plan to
discontinue the operations of its Alpha division. Maxy estimated that Alpha's 20X3 operating loss
would be $500,000 and that the fair value of Alpha's facilities was $300,000 less than their carrying
amounts.
Alpha's 20X2 operating loss was $1,400,000, and the division was actually sold for $400,000 less than
its carrying amount in 20X3. Maxy's effective tax rate is 30%.
In its 20X2 income statement, what amount should Maxy report as loss from discontinued
operations?
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