Question

Southeast Airlines had pretax earnings of $65 million. Included in this amount is income from discontinued operations of $10 million. The company’s tax rate is 25%. What is the amount of income tax expense that Southeast would report in its income statement for continuing operations? (Enter your answer in millions rounded to 2 decimal place (i.e., i.e., 5,500,000 should be entered as 5.50). Amount to be deducted should be indicated with a minus sign.)

Answer 1

To calculate the income tax expense for Southeast Airlines for its continuing operations, subtract the income from discontinued operations ($10 million) from the pretax earnings ($65 million) to get the taxable income ($55 million). Multiply the taxable income by the tax rate (25%) to find the income tax expense ($13.75 million).

Step-by-step explanation:

To calculate the amount of income tax expense that Southeast Airlines would report in its income statement for continuing operations, we need to determine the taxable income for continuing operations and then multiply it by the tax rate.

The taxable income for continuing operations can be calculated by subtracting the income from discontinued operations ($10 million) from the pretax earnings ($65 million).

This gives us a taxable income of $55 million.

To find the amount of income tax expense, we multiply the taxable income by the tax rate (25%).

Therefore, the income tax expense Southeast would report in its income statement for continuing operations would be $55 million x 0.25 = $13.75 million.