Restating prior periods due to a discontinued operation. Baxter Holdings reported pretax income from continuing operations of $800,000 in the first quarter of the current year. At that point, projected pretax income for the rest of the year was $1,000,000. At the end of that quarter, the company estimated an effective annual tax rate of 29.5% based on a statutory tax rate of 30% on the first $1,500,000 of pretax income and 35% thereafter, projected pretax income for the balance of the year of $1,100,000, and tax credits of $29,500.
During the second quarter of the current year, the company decided to discontinue a component of its business that manufactured custom cabinetry. At the end of the first quarter of the current year, the cabinetry component had reported pretax losses of $220,000, projected losses of $320,000 for the balance of the year, and no estimated tax credits for the year. During the second quarter of the year, the discontinued component reported pretax losses of $80,000 prior to being shut down. Pretax impairment losses of $400,000 were also reported for the component during the second quarter of the current year.
Excluding the discontinued component, the company reported pretax income in the second quarter of the current year of $525,000 and projected pretax income for the balance of the year of $1,050,000. Annual tax credits of $15,000 traceable to the continuing operations are projected for the year.
For quarter 1 restated and quarter 2 of the current year, prepare a schedule that shows pretax income, tax expense or benefit, and net income for both continuing operations and the discontinued operation.