East Company, a Highly Diversified Corporation, Reports the Results of Operations

Essay

East Company, a highly diversified corporation, reports the results of operations quarterly. At the beginning of the third quarter, management decided to discontinue its recreational division. At this time, a formal plan was authorized, calling for disposal by year end. Results for the current year, excluding taxes, are as follows:
$$\begin{array} { l c c } \text { Quarter } & \begin{array} { c } \text { Continuing } \\\text { Operations }\end{array} & \begin{array} { c } \text { Discontinued } \\\text { Segment }\end{array} \\\hline \text { First } & \$ 33,000 & \\\text { Second } & 40,200 & \\\text { Third } & 62,000 & \$ ( 6,500 ) \\\text { Fourth } & 71,500 & 1,200\end{array}$$ The following additional information was provided:
a.
The first two quarters include results of operations of the discontinued segment. The segment reported first and second quarter pretax losses of $8,000 and $12,000, respectively.
b.
The estimated annual income tax rate in the first and second quarters was 35%. Because of the decision to discontinue, the revised annual effective tax rate was determined to be 40%.
Required:
For each quarter, present the results of operations and the related tax expense or tax benefit. Where applicable, include the original and restated amounts in the presentation.