On November 1, 2019, Woods Company announced its plans to sell its subsidiary, Williams Division (a major strategic component of the company). By December 31, 2019, Woods had not sold Williams Division and so it classifies the division as held for sale. During 2019, Woods recorded the following revenues and expenses for Williams Division and the remainder of the company: Williams Division Remainder of Company Sales revenue $170,000 $950,000 Cost of goods sold 119,000 560,000 Operating expenses 42,000 190,000 Woods is subject to a 30% income tax rate. On December 31, 2019, the net book value of Williams Division is $500,000, consisting of assets of $910,000 and liabilities of $410,000. On this date, Woods estimates that the fair value of Williams Division is $420,000. The company had 50,000 shares of common stock outstanding during all of 2019.
On November 1, 2019, Woods Company announced its plans to sell its subsidiary, Williams Division (a major strategic component of the company). By December 31, 2019, Woods had not sold Williams Division and so it classifies the division as held for sale. During 2019, Woods recorded the following revenues and expenses for Williams Division and the remainder of the company: Williams Division Remainder of Company Sales revenue $170,000 $950,000 Cost of goods sold 119,000 560,000 Operating expenses 42,000 190,000 Woods is subject to a 30% income tax rate. On December 31, 2019, the net book value of Williams Division is $500,000, consisting of assets of $910,000 and liabilities of $410,000. On this date, Woods estimates that the fair value of Williams Division is $420,000. The company had 50,000 shares of common stock outstanding during all of 2019.
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 1P
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Question
On November 1, 2019, Woods Company announced its plans to sell its subsidiary, Williams Division (a major strategic component of the company). By December 31, 2019, Woods had not sold Williams Division and so it classifies the division as held for sale.
During 2019, Woods recorded the following revenues and expenses for Williams Division and the remainder of the company:
|
|
Williams Division
|
Remainder of Company
|
| Sales revenue | $170,000 | $950,000 |
| Cost of goods sold | 119,000 | 560,000 |
| Operating expenses | 42,000 | 190,000 |
Woods is subject to a 30% income tax rate.
On December 31, 2019, the net book value of Williams Division is $500,000, consisting of assets of $910,000 and liabilities of $410,000. On this date, Woods estimates that the fair value of Williams Division is $420,000. The company had 50,000 shares of common stock outstanding during all of 2019.
| Instructions: | |
| 1. | Prepare the |
| 2. | Prepare a 2019 multiple-step income statement for Woods. |
| 3. | Show how Williams Division would be reported on Woods’s December 31, 2019, balance sheet. |
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