Baxter Holdings reported pretax income from continuing operations of $800,000 in the first quarter of 2014. At that point, projected pretax income for the rest of the year was $1,000,000. At the end of that quarter, the company estimated an effective annual tax rate of 29.5% based on a statutory tax rate of 30% on the first $1,500,000 of pretax income and 35% thereafter, projected pretax income for the balance of the year of $1,100,000, and tax credits of $29,500.
During the second quarter of 2014, the company decided to discontinue a component of its business that manufactured custom cabinetry. At the end of the first quarter of 2014, the cabinetry component had reported pretax losses of $220,000, projected losses of $320,000 for the balance of the year, and no estimated tax credits for the year. During the second quarter of the year, the discontinued component reported pretax losses of $80,000 prior to being shut down.
Pretax impairment losses of $400,000 were also reported for the component during the second quarter of 2014. Excluding the discontinued component, the company reported pretax income in the second quarter of 2014 of $525,000 and projected pretax income for the balance of the year of $1,050,000. Annual tax credits of $15,000 traceable to the continuing operations are projected for the year.
For quarter 1 restated and quarter 2 of 2014, prepare a schedule that shows pretax income, tax expense or benefit, and net income for both continuing operations and the discontinued operation.