B is corrent. The requirement is to determine the amount of income from continuing operations after income taxes for year 2 and year 1 to be reported on a revised comparative income statement. Helen discontinued a component in year 2. Financial statements of current and prior periods should disclose the results of operations of the disposed segment, less applicable taxes, as a separate component of income. Therefore, the discontinued operations should be reported separately, net of taxes, for both year 2 and year 1. Income from continuing operations must be adjusted so the effect of the discontinued segment is taken out. | | Year 2 | Year 1 | | Operating income, as reported | $1,600,000 | $1,200,000 | | Add back loss from discontinued operations | 640,000 | 500,000 | | Income from continuing operations, before taxes | 2,240,000 | 1,700,000 | | Less 40% income taxes | 896,000 | 680,000 | | Income from continuing operations | $1,344,000 | $1,020,000
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A is incorrect. The requirement is to determine the amount of income from continuing operations after income taxes for year 2 and year 1 to be reported on a revised comparative income statement. Helen discontinued a component in year 2. Financial statements of current and prior periods should disclose the results of operations of the disposed segment, less applicable taxes, as a separate component of income. Therefore, the discontinued operations should be reported separately, net of taxes, for both year 2 and year 1. Income from continuing operations must be adjusted so the effect of the discontinued segment is taken out.
| | Year 2 | Year 1 | | Operating income, as reported | $1,600,000 | $1,200,000 | | Add back loss from discontinued operations | 640,000 | 500,000 | | Income from continuing operations, before taxes | 2,240,000 | 1,700,000 | | Less 40% income taxes | 896,000 | 680,000 | | Income from continuing operations | $1,344,000 | $1,020,000
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C is incorrect. The requirement is to determine the amount of income from continuing operations after income taxes for year 2 and year 1 to be reported on a revised comparative income statement. Helen discontinued a component in year 2. Financial statements of current and prior periods should disclose the results of operations of the disposed segment, less applicable taxes, as a separate component of income. Therefore, the discontinued operations should be reported separately, net of taxes, for both year 2 and year 1. Income from continuing operations must be adjusted so the effect of the discontinued segment is taken out.
| | Year 2 | Year 1 | | Operating income, as reported | $1,600,000 | $1,200,000 | | Add back loss from discontinued operations | 640,000 | 500,000 | | Income from continuing operations, before taxes | 2,240,000 | 1,700,000 | | Less 40% income taxes | 896,000 | 680,000 | | Income from continuing operations | $1,344,000 | $1,020,000
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D is incorrect. The requirement is to determine the amount of income from continuing operations after income taxes for year 2 and year 1 to be reported on a revised comparative income statement. Helen discontinued a component in year 2. Financial statements of current and prior periods should disclose the results of operations of the disposed segment, less applicable taxes, as a separate component of income. Therefore, the discontinued operations should be reported separately, net of taxes, for both year 2 and year 1. Income from continuing operations must be adjusted so the effect of the discontinued segment is taken out.
| | Year 2 | Year 1 | | Operating income, as reported | $1,600,000 | $1,200,000 | | Add back loss from discontinued operations | 640,000 | 500,000 | | Income from continuing operations, before taxes | 2,240,000 | 1,700,000 | | Less 40% income taxes | 896,000 | 680,000 | | Income from continuing operations | $1,344,000 | $1,020,000
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