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Leigh Corp. disposed of its Knit Products Division in June of 2020 at a loss of $19,000 before tax. Prior to the sale, the Knit Products Division (considered a separate business component) reported a net loss from operations of $202,500 before tax. Leigh Corp. reported income from continuing operations of $450,000 before tax for 2020. a. Assuming an income tax rate of 25%, prepare an income statement beginning with Income from Continuing Operations. Ignore earnings per share disclosures.

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a. The preparation of the income statement should be presented below:

Leigh Corp.

Income statement

June.2020

Income from continuing operations [75% of $450,000] $337,500

Discounted operations:  

Loss from operations of discontinued operations, net of tax savings [75% of $202,500] $          ($151,875)

Loss on disposal of discontinued operations, net of tax savings [75% of $19,000] $            ($14,250)  

Net Income  $171,375

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