Nelly Company Sold Its Cattle Ranching Component on June 30

question 121

Multiple Choice

Nelly Company sold its cattle ranching component on June 30, 2016, for a gain of $1,000,000. From January through June, the component had sustained operating income of $300,000. The income tax rate is 35%. How should Nelly report the income and the sale on its income statement?

• A) as $300,000 operating income and a $1,000,000 gain on sale of component
• B) as a $1,300,000 gain in operating income
• C) as a net of tax gain of $845,000 after income from continuing operations
• D) as $195,000 operating income and a $650,000 gain on sale of the component