[yellowstar55]

Loss on discontinued operations, net of applicable tax of $2700. $5400

What does the net of applicable tax of $2700 mean, that you add or subtract it to the $5400 or do you not do anything.

[morgaine300]

"Net of" means the tax expense or benefit has already been applied and taken off the original gross amount. However, in problems they can tend to write it different ways and it can be hard telling whether the amount given is the gross (meaning you have to subtract) or it's already netted out.

From the way it's written, I would guess the tax has already been taken out, i.e. that the original loss was 8100. (Net of 2700 tax = 5400.)

If they'd listed is like "loss on discontinued operations, 5400, net of applicable tax of 2700," I'd suspect the 5400 was the gross and you'd still have to subtract the tax out.

One way to possibly know is actually figure out the tax. That is, 2700 is 50% of 5400. It's 33% of 8100. Do you know the tax rate they're using? (Problems in most books use a 30-40% range, but not always.) If it doesn't give a rate, go back up to where it listed Tax Expense -- it should be right above this, above the Income from Continuing Operations. And divide that expense by the Income before Tax number.

In a real company this would not be a question because they would definitely list the amount with taxes already netted out, regardless of whether they list the gross or not. That is, the far right column is the number actually being used on the income statement. If that number was 5400, that's the net, with tax already out. The reason I think that might be it is cause the 5400 is listed last, on the right, like maybe it's already netted out. Meaning you just need to list it that way.

But unless I can see it, and because of the weird things textbooks can do, I can't guarantee that.