Question

McClure Manufacturing reported a pretax loss from operations of $45,000 for the first quarter of 2013. The estimated effective annual tax rate at that time was based on the following information:
1. A statutory tax rate of 32% and annual estimated tax credits of $7,000.
2. Projected annual pretax loss of $70,000.
3. Taxable income of $12,000 and $10,000, respectively, for 2011 and 2012.
4. Statutory tax rates in 2011 and 2012 of 30% and 28%, respectively.
5. No recognized tax benefit associated with net operating loss carry forwards.
During the second quarter of 2013, McClure decided to discontinue an operation that had reported pretax losses of $15,000 in the first quarter. At the end of the first quarter of 2013, the discontinued operation had accounted for $2,000 of the annual estimated tax credit and $55,000 of the annual pretax loss. In the second quarter, the discontinued operation reported pretax operating losses of $15,000 and pretax impairment losses of $42,000. Continuing operations reported second-quarter pretax income of $58,000, projected annual pretax income of $90,000, and annual estimated tax credits of $5,000.
During the third quarter of 2013, continuing operations reported pretax income of $40,000, projected annual pretax income of $110,000, and annual estimated tax credits of $8,000. Also during the third quarter, the discontinued operation reported operating losses of $30,000 and gains from the disposal of assets of $25,000, revised the earlier impairment losses from $42,000 to $34,000, and recorded additional impairment losses of $16,000.
Required
Given the 2013 statutory tax rate of 32%, calculate the pretax income (loss) and related tax expense (benefit) for the first three quarters of 2013 for continuing and discontinued operations.


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  • CreatedApril 13, 2015
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