Lupton Inc

question 226

Multiple Choice

Lupton Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $200,000 loss in the year of disposal. The loss on disposal of the segment was $100,000. If the tax rate is 30%, and income before income taxes was $1,600,000,

• A) the income tax expense on the income before discontinued operations is $390,000.
• B) the income from continuing operations is $1,120,000.
• C) net income is $1,300,000.
• D) the losses from discontinued operations are reported net of income taxes at $300,000.

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Definitions:

Accounts Receivable

Debts owed by customers to a business for goods or services already provided but unpaid.

Accounts Payable

Liabilities of a company or individual that are due to creditors within a short period of time, typically for purchases of goods or services.

Cash

Represents money in coins, currency, or bank balances that is readily available for use.

Supplies Expense

The cost associated with consumable items used during the business operations and not directly tied to the production of goods or services.