Question 1 Part A and B

A. Freda's Florist reported the following before-tax income statement items for the year ended December 31, 2018:

Operating income	$	265,000
Income on discontinued operations		63,000

All income statement items are subject to a 34% income tax rate. In its 2018 income statement, Freda's separately stated income tax expense and total income tax expense would be:

Multiple Choice

• $111,520 and $90,100, respectively.

• $111,520 and $111,520, respectively.

• $90,100 and $111,520, respectively.

• $111,520 and $161,520, respectively.

B. On October 28, 2018, Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2018, the end of the company's fiscal year. The division's loss from operations for 2018 was $1,860,000. The division's book value and fair value less cost to sell on December 31 were $3,030,000 and $2,450,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2018 income statement?

Multiple Choice

• $1,860,000 loss.

• $2,440,000 loss.

• No loss would be reported.

• $580,000 impairment loss included in continuing operations and a $1,860,000 loss from discontinued operations.