Problem 3- Discontinued Operations|24During fiscalyear 2020 the company sold one of theirkey divisions. The followinginformation has been provided for this discontinued operation.Sold the Garage Door Division on October 31, 2020$ 1,30,000 Gain from operations of discontinuedGarage Door divisionfromJanuaury 1, 2020 throughOctober 31, 2020.$ 12,500,000 Gain from sale of the Garage Doordivision on Octaber 31, 2020.Note: The operating gain of $13 millionand gain fromthe sale of $12.5 million are both pre-tax amounts.The company CF.O. has detemined that a30% tax rate should be applied.Required: Prepare the Discontinued Operations section for the income statement.

Discontinued operations is separate component in the entity's income statement that provides details…

Answered: During fiscal year 2020 the company…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter5: The Income Statement And The Statement Of Cash Flows

Section: Chapter Questions

Problem 2P

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Exercise 4-8 (Algo) Discontinued operations; disposal in subsequent year [LO4-4] Kandon Enterprises, Incorporated, 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, 2024, Kandon adopted a formal plan to sell the division. The sale was completed on April 30, 2025. At December 31, 2024, the component was considered held for sale. Consider the following: On December 31, 2024, the company’s fiscal year-end, the book value of the assets of the horse division was $438,000. On that date, the fair value of the assets, less costs to sell, was $380,000. The before-tax loss from operations of the division for the year was $320,000. The after-tax income from continuing operations for 2024 was $580,000. The company’s effective tax rate is 25% . Required: Prepare a partial income…
Problem 3. The following costs are obtained regarding the restructuring of one of the businessoperations of DIP Inc. as of December 31, 2014:Direct expenditures arising from restructuring P1,000,000Salaries of employees to be incurred after operations cease 2,000,000Employee benefits associated with the closure of operations 3,000,000Future operating losses 4,000,000Cost of retraining or relocating continuing staff 5,000,000Marketing or advertising program to promote the new company image 6,000,000Investment in new system and distribution network 7,000,000What is the total amount to be recognized as restructuring provision as of December 31,2014?
Question 3What is the proper solution for this problem? B. On August 1, 2021, the board of directors of LL Co. voted to approve the disposal of one of its B division.The sale is expected to occur in June of next year. The B division's revenue and expenses for the period from January 1 to July 31 amounted to P14,000,000 and P10,000,000, respectively. For the period from August 1 to December 31, B Division's revenue amounted to P5,000,000 while expenses totaled P4,500,000. The carrying amount of B Division's net assets on December 31, 2021 was P21,000,000 and the fair value less cost of disposal was P25,000,000. The sale contract requires the company to pay termination cost of affected employees in the amount of P1,200,000 to be paid on September 30, 2022. The income tax rate is 30%. Required:25 – 27. Determine the income (loss) net of tax from discontinued operation.
Dropping Unprofitable Department Thomas Corporation has four departments, all of which appear to be profitable except department 4. Operating data for 2019 are as follows: Total Departments 1-3 Department 4 Sales $962,500 $820,000 $142,500 Cost of sales 655,200 541,200 114,000 Gross profit 307,300 278,800 28,500 Direct expenses $144,000 $120,000 $24,000 Common expenses 117,000 101,000 16,000 Total expenses 261,000 221,000 40,000 Net income (Loss) $46,300 $57,800 $(11,500) Required a. Calculate the gross profit percentage for departments 1-3 combined and for department 4. Department 1-3 Answer=______%Department 4 Answer=______% b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.) The firm's net income would be: $_______
Dropping Unprofitable Department Thomas Corporation has four departments, all of which appear to be profitable except department 4. Operating data for 2019 are as follows: Total Departments 1-3 Department 4 Sales $962,000 $810,000 $152,000 Cost of sales 640,500 526,500 114,000 Gross profit $321,500 $283,500 $38,000 Direct expenses $144,000 $120,000 $24,000 Common expenses 127,000 106,000 21,000 Total expenses $271,000 $226,000 $45,000 Net income (Loss) $50,500 $57,500 $(7,000) Required a. Calculate the gross profit percentage for departments 1-3 combined and for department 4. Department 1-3 Answer%Department 4 Answer% b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.) The firm's net income would be: $Answer
22. A company acuqires 80% of D company for $600,000 on January, 2020. D company reported common stock of $300,000 and retained earnings of $210,000 on that date. Equipment was undervalued by $40,000 and buildings were undervalued by $50,000, each having a 10-year remaining life. Any excess consideration transferred over fair value was attributed to goodwill with an indefinite life. Based on annual review, goodwill has not been impaired. During 2020, D company reported net income of $90,000 and paid dividends of $30,000. Assume that equty method is applied. What is the acquisition value attributable to the non-controlling interest in D company at January 1,2020? Your answer:
15. Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): 2021 2020 Sales revenue $ 4,450,000 $ 3,550,000 Cost of goods sold 2,870,000 2,010,000 Administrative expense 810,000 685,000 Selling expense 370,000 312,000 Interest revenue 151,000 141,000 Interest expense 202,000 202,000 Loss on sale of assets of discontinued component 52,000 — On July 1, 2021, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2021, for $52,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: 1/1/2021–9/30/2021 2020 Sales revenue $ 410,000 $ 510,000 Cost of goods sold (295,000 ) (326,000 ) Administrative expense (51,000 )…
4. Enron Company decided on August 1, 2011 to dispose of a component of its business. The component was sold on November 30, 2011. Enron's income for 2011 included income of P5,000,000 from operating the discontinued segment from January 1 to the sale date. Enron incurred a loss on the November 30 sale of P4,500,000. Ignoring income tax, what amount should be reported in the 2011 income statement as income or loss under "discontinued operation"? a. 4,500,000 loss b. 5,000,000 income c. 500,000 loss d. 500,000 income
Compensation Pools; Residual Income; Includes a Review of Chapter 19 McCoy Brands Inc.(MBI) is a retailer of consumer products. The company made two acquisitions in previous years todiversify its product lines. In 2017, MBI acquired a consumer electronics firm producing computers.MBI now (2019) has three divisions: Consumer Electronics, Office Supplies, and Computers. Thefollowing information (in thousands) presents operating revenue, operating income, and investedassets of the company over the last 3 years:Revenue Income AssetsConsumer Electronics2017 $155,780 $16,750 $84,5502018 125,480 9,500 90,4502019 90,950 5,700 92,450Office Supplies2017 48,750 2,100 22,5002018 45,660 2,340 21,9002019 52,800 3,250 18,000Computers2017 100,500 2,350 21,4502018 95,400 1,650 22,5502019 114,350 2,575 24,100The number of executives covered by MBI’s current compensation package follows:2017 2018 2019Consumer Electronics 300 350 375Office Supplies 40 40 37Computers 120 140 185The current compensation…
Question 8 Link Co. purchased machinery that cost $3,000,000 on January 4, 2019. The entire cost was recorded as an expense. The machinery has a nine-year life and a $200,000 residual value. The error was discovered on December 20, 2021. Ignore income tax considerations.Link's income statement for the year ended December 31, 2021, should show the cumulative effect of this error in the amount of $2,333,333. $2,066,667. $0. $2,377,778.
Practice Exercise 6-3: (Profit or Loss Distribution – No agreement, Equally, Arbitrary Ratio) Ann and Dox contributed P150,000 and P300,000 cash, respectively, to put up the capital for a cell phone loading business. The business had normal first year problems, but during the second year the operation was very successful. The company reported the following key operating performance figures for 2019 and 2020 of operations: Year 2019 Year 2020 Operating Revenues P980,000 P320,000 Operating Expenses 820,000 380,000 Instruction: Determine how the partners would share the income or loss for each year under each of the following assumptions: a. Ann and Dox failed to include stated ratios in the partnership agreement. Year 2019 Ann Dox Year 2020 Ann Dox b. The partners agreed to share income or losses equally. Year…
Practice Exercise 6-3: (Profit or Loss Distribution – No agreement, Equally, Arbitrary Ratio) Ann and Dox contributed P150,000 and P300,000 cash, respectively, to put up the capital for a cell phone loading business. The business had normal first year problems, but during the second year the operation was very successful. The company reported the following key operating performance figures for 2019 and 2020 of operations: Year 2019 Year 2020 Operating Revenues P980,000 P320,000 Operating Expenses 820,000 380,000 Instruction: Determine how the partners would share the income or loss for each year under each of the following assumptions: The partners agreed to share in the ratio of 1/3 and 1/6 for Ann and Dox, respectively. Year 2019 Ann Dox Year 2020 Ann Dox…

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