Questions:
1. During 2011, Comet Cares, Inc. decided to sell an unprofitable segment of its business. The sale of this segment qualifies as a discontinued operation for financial reporting purposes. However, at the end of 2011, Comet had yet to sell the segment. On December 31, 2011 the segment assets had a fair value minus anticipated costs to sell of $3,500,000 and a book value of $3,700,000. For the year, the segment reported an operating loss of $500,000. In January of 2012, Comet Cares sold the segment for $3,600,000. Operating losses in the first month of 2012 amounted to $45,000. Assume a 40% tax rate in both 2011 and 2012.
a) What is the after-tax dollar value impact of the discontinued operation on 2011 Net Income (use ( ) for a decrease)?
b) What is the after-tax dollar value impact of the discontinued operation on 2012 Net Income (use ( ) for a decrease)?