The Ottoboni Corporation had two operating divisions, one manufacturing division and a finance division. Both divisions are considered separate components. The finance division has been unprofitable, and on October 3, 2006, Ottoboni adopted a formal plan to sell the division. The sale was completed on March 19, 2007. At December 31, 2006, the division was considered held for sale
On December 31, 2006, the company s fiscal year-end, the book value of the assets of the finance division was $2,100,000. On that date, the fair value of the assets, less costs to sell, was $1,900,000. The before-tax operating loss of the division for the year was $270,000.The company s effective tax rate is 40%. The after-tax income from continuing operations for 2006 is $600,000.
1. Prepare a partial income statement for 2006 beginning with income from continuing operations. Ignore EPS disclosures.
2. Repeat instruction 1 assuming that the estimated net sales price of the finance division s assets was $2,400,000, instead of $1,900,000.
NOTE: In this exercise, a partial income statement is required for instruction 2