5. Zebra Company is a diversified entity with nationwide interests in commercial real estate development, banking, mining, and food distribution. The food distribution division was deemed to be inconsistent with the long-term direction of the entity. On October 1, 2011, the board of directors voted to approve the disposal of this division. The sale is expected to occur in August 2012. The food distribution had the following revenue and expenses in 2011: January 1 to September 30, revenue of P35,000,000 and expenses of P27,000,000; October 1 to December 31, revenue of P15,000,000 and expenses of P10,000,000. The carrying amount of the division's assets at December 31, 2011 was P56,000,000 and the fair value less cost to sell was P56,500,000. The sale contract requires Zebra to terminate certain employees incurring an expected termination cost of P4,000,000 to be paid b December 15, 2012. Income tax rate is 30%. 11 the income statement for the year ended December 31, 2011, what amount should be reported as income from discontinued operation?

5. Zebra Company is a diversified entity with nationwide interests in commercial real estate development, banking, mining, and food distribution. The food distribution division was deemed to be inconsistent with the long-term direction of the entity. On October 1, 2011, the board of directors voted to approve the disposal of this division. The sale is expected to occur in August 2012. The food distribution had the following revenue and expenses in 2011: January 1 to September 30, revenue of P35,000,000 and expenses of P27,000,000; October 1 to December 31, revenue of P15,000,000 and expenses of P10,000,000. The carrying amount of the division's assets at December 31, 2011 was P56,000,000 and the fair value less cost to sell was P56,500,000. The sale contract requires Zebra to terminate certain employees incurring an expected termination cost of P4,000,000 to be paid b December 15, 2012. Income tax rate is 30%. 11 the income statement for the year ended December 31, 2011, what amount should be reported as income from discontinued operation?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 24PC

See similar textbooks

Similar questions

The Kerr-Graham Corporation had two operating divisions, one manufacturing cooking utensils and the other herb gardens. Both divisions qualified as separate components of the entity. On September 15, 2015, the company adopted a plan to sell the assets of the herb garden division. The actual sale was made on December 8, 2015, at a price of $1.8 million. The book value of the division’s asset was $3 million, resulting in a before-tax loss of $1.2 million on the sale. The division incurred before-tax operating losses of $300,000 from the beginning of the year to September 15, and $90,000 from September 16 through December 8. The income tax rate is 40%. Kerr-Graham’s after-tax income from its continuing operations is $1,050,000. Required: Prepare Kerr-Graham’s income statement for 2015 beginning with “income from continuing operations.” Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year. Show calculations.…
The Kerr-Graham Corporation had two operating divisions, one manufacturing cooking utensils and the other herb gardens. Both divisions qualified as separate components of the entity. On September 15, 2015, the company adopted a plan to sell the assets of the herb garden division. The actual sale was made on December 8, 2015, at a price of $1.8 million. The book value of the division’s asset was $3 million, resulting in a before-tax loss of $1.2 million on the sale. The division incurred before-tax operating losses of $300,000 from the beginning of the year to September 15, and $90,000 from September 16 through December 8. The income tax rate is 40%. Kerr-Graham’s after-tax income from its continuing operations is $1,050,000. Required: Prepare Kerr-Graham’s income statement for 2015 beginning with “income from continuing operations.” Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year. Show calculations.
14.Kandon Enterprises, Inc., has two operating divisions; one manufactures machinery and the other breeds and sells horses. Both divisions are considered separate components as defined by generally accepted accounting principles. The horse division has been unprofitable, and, on November 15, 2021, Kandon adopted a formal plan to sell the division. The sale was completed on April 30, 2022. At December 31, 2021, the component was considered held for sale. On December 31, 2021, the company’s fiscal year-end, the book value of the assets of the horse division was $372,000. On that date, the fair value of the assets, less costs to sell, was $320,000. The before-tax loss from operations of the division for the year was $260,000. The company’s effective tax rate is 25%. The after-tax income from continuing operations for 2021 was $520,000. Required: Prepare a partial income statement for 2021 beginning with income from continuing operations. Ignore EPS disclosures. Prepare a partial…
XYZ Corp. is a manufacturer of generators. The domestic market for this products is currently not doing well, and therefore many entities in this business are switching to export. As per audited financial statements for the year ended December 31, 2021, the entity had a net loss of P 2,000,000. At December 31, 2021, its current assets aggregate to P 20,000,000 and current liabilities aggregate to P 25,000,000. Due to expected favorable changes in the government policies for this industry, the entity is projecting profits to the coming year. Furthermore, the shareholders of the entity have arranged alternative additional sources of financing for its expansion plans and to support its working capital requirements in the next 12 months. Should ABC Corp. prepare its financial statements under the going concern assumption? Explain.
Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2016, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2016, at a price of $600,000. The book value of the division’s assets was $1,000,000, resulting in a before-tax loss of $400,000 on the sale. The division incurred a before-tax operating loss from operations of $130,000 from the beginning of the year through December 15. The income tax rate is 40%. Chance’s after-tax income from its continuing operations is $350,000. Required: Prepare an income statement for 2016 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year.
In 2016, Hye Industries decided to discontinue its Laminating Division, a separately identifiable component of Hye’s business. At December 31, 2016, the division has not been completely sold. However, negotiations for the final and complete sale are progressing in a positive manner, and it is probable that the disposal will be completed within a year. Analysis of the records disclosed the following: Operating loss for the year 899,000 Loss on disposal of some assets during 2016 50,000 Expected operating loss in 2017 450,000 Expected gain in 2017 on disposal of division 200,000 Assuming a 35% tax rate, how much will be reported as loss from discontinued operations in Hye’s 2016 income statement?
On May 31, 2015, top management of Stafford Manufacturing Co. decided to dispose of an unprofitable business component. An operating loss of $210,000 associated with the component was incurred during the year. The plant facilities associated with the business segment were sold on November 30, and a $23,000 gain was realized on the sale of the plant assets. Assuming a 30% tax rate, prepare the discontinued operations section of Stafford Manufacturing Co.’s income statement for the year ending December 31, 2015. What additional information about the discontinued segment would be provided by Stafford Manufacturing if it were reporting using the accounting standards of the United Kingdom?
Vegetarian Delights has been experiencing declining market conditions for its specialty foods division. Management decided to test the operational assets of the division for possible impairment. The test revealed the following: book value of the division’s assets, $33.5 million; fair value of the division’s assets, $30 million; sum of estimated future cash flows generated from the division’s assets, $38 million. What amount of impairment loss, if any, should Vegetarian Delights record?
Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2021, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2021, at a price of $600,000. The book value of the division’s assets was $1,000,000, resulting in a before-tax loss of $400,000 on the sale. The division incurred a before-tax operating loss from operations of $120,000 from the beginning of the year through December 15. The income tax rate is 25%. Chance’s after-tax income from its continuing operations is $550,000.Required:Prepare an income statement for 2021 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year.
Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2021, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2021, at a price of $800,000. The book value of the division’s assets was $1,410,000, resulting in a before-tax loss of $610,000 on the sale.The division incurred a before-tax operating loss from operations of $260,000 from the beginning of the year through December 15. The income tax rate is 25%. Chance’s after-tax income from its continuing operations is $750,000. Required:Prepare an income statement for 2021 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common stock were outstanding throughout the year. (Amounts to be…
Kandon Enterprises, Inc., has two operating divisions; one manufactures machinery and the other breeds and sells horses. Both divisions are considered separate components as defined by generally accepted accounting principles. The horse division has been unprofitable, and, on November 15, 2021, Kandon adopted a formal plan to sell the division. The sale was completed on April 30, 2022. At December 31, 2021, the component was considered held for sale.On December 31, 2021, the company’s fiscal year-end, the book value of the assets of the horse division was $240,000. On that date, the fair value of the assets, less costs to sell, was $200,000. The before-tax loss from operations of the division for the year was $140,000. The company’s effective tax rate is 25%. The after-tax income from continuing operations for 2021 was $400,000.Required:1. Prepare a partial income statement for 2021 beginning with income from continuing operations. Ignore EPS disclosures.2. Repeat requirement 1…
An entity is reviewing one of its business segments for impairment. The carrying value of its netassets is € 20 million. Management has produced two computations for the value-in-use of thebusiness segment. The first value (€ 18 million) excludes the benefit to be derived from a futurereorganization, but the second value (€ 22 million) includes the benefits to be derived from thefuture reorganization. There is not an active market for the sale of the business segments.Required: Explain whether the business segment is impaired.