Gleeson Industries consists of four separate divisions: compressed wood products, chemicals, stone products, and plastics. On March 15, 2010, Gleeson sold the chemicals division for $625,000 cash. Financial information related to the chemicals division follows:
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
Definitions:
Equilibrium Price
Equilibrium Price is the price at which the quantity of a good or service demanded equals the quantity supplied, resulting in market balance.
Equilibrium Quantity
The quantity of goods or services that is supplied and demanded at the equilibrium price, where demand equals supply.
Non-collusive Oligopolist
A firm in an oligopoly market structure that independently sets prices and output levels without secret agreements with competitors.
Marginal Cost
The increase in cost that comes from making one more unit of a product or service.
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