On October 1, 2017 LeBron Co. agreed to sell the assets of its Heat Division to

Question

On October 1, 2017 LeBron Co. agreed to sell the assets of its Heat Division to Cavalier Inc. for $80 million. The sale was completed on December 31, 2017. The following additional facts pertain to the transaction:

The Heat Division qualifies as a component of the entity according to GAAP regarding discontinued operations.

The book value of Heat's assets totaled $74 million on the date of the sale.

Heat's operating income was a pre-tax loss of $3.5 million in 2017.

LeBron's income tax rate is 30%.

17. In the 2017 income statement for LeBron Co., it would report income (loss) from discontinued operations of:

Explanation / Answer

So, the LeBron Co. would report the gain of $ 1.75 million from discontinued operations.

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Operating Loss $ (3,500,000.00) Gain on Disposal(80-74) $    6,000,000.00 Income from Discontinuing Opearions $    2,500,000.00 Tax @ 30% $      (750,000.00) Income after from Discontinuing Opearions $    1,750,000.00

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