Gleeson Industries Consists of Four Separate Divisions: Compressed Wood Products

question 75

Multiple Choice

Gleeson Industries consists of four separate divisions: compressed wood products, chemicals, stone products, and plastics. On March 15, 2017, Gleeson sold the chemicals division for $625,000 cash. Financial information related to the chemicals division follows:
$$\begin{array}{l}\text { Peried from } 1/1/17 \text { to } 3/15/17\\\begin{array} { | l | r | } \hline \text { Sales } & \$ 175,000 \\\hline \text { Operating expenses } & 160,000 \\\hline \text { Net aperating income (1055) } & \$ 15,000 \\\hline & \\\hline \text { As of 3/15/17 } & \\\hline \text { Assets } & \$ 1,850,000 \\\hline \text { Liabilities } & 1,400,000 \\\hline\end{array}\end{array}$$
If the income tax rate for the company is 35%, what amount of income tax liability on the disposal of the business segment will be recognized?

• A)$218,750
• B)$ 61,250
• C)$ 5,250
• D)$157,500

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Definitions:

Market-to-Book Ratio

A financial ratio that compares a company's market value to its book value, indicating how much shareholders are paying for the net assets of a company.

Stock Price

The present rate at which a company's stock is traded on the stock market.

Book Value

The net value of a company's assets as recorded on its balance sheet, and calculated by subtracting liabilities from the total value of assets.

Production Possibilities Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs and technology, illustrating the trade-offs and opportunity costs in production.