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During 2020, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain of $3,000,000, net of taxes, on the sale of Pine's assets. Pine's operating losses, net of taxes, were $3,500,000 in 2020. How should these facts be reported in Lopez's income statement for 2020

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Answer:

The income statement of Lopez corporation  was reported to have a loss of $500,000 and is further explained below.

Explanation:

Solution

Given that:

Lopez corporation realized a gain of = $3,000,000

Pine's net taxes, operating losses in 2020 was = $3,500,000

Now,

The way it will be reported in Lopez income statement for 2020 is shown below:

                 The Lopez's Income statement for 2020

                                      Total Amount to be included in

Income from Continuing Operations     Results of Discontinued Operations                                                                    

               0                                                                    $500,000 loss

Note: We subtract the operating loss and net taxes of Pine Division from Lopez cooperation gain, which is stated as follows

$3,500,000 - $3,000,000 = $500,000

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