Super Soups, Inc. is a Chicago based company that produces soup. Super Soups is publicly traded and has a February 28, 2022 fiscal year end. The demand for Super Soup’s products has increased significantly during COVID-19 (primarily to the number of people working from home). Super Soups did an analysis of the capabilities of the old production equipment and all but one machine were determined to be in superior condition. Machine #111 was assessed to be operating at only 50% of the necessary production level and would be able to generate $120,000 from production and a sale of the machine in the next fiscal year. As a result of this analysis Super Soups decided to sell Machine #111. The company was able to locate a buyer immediately and sold Machine #111 on February 21, 2022. The sales price of the machine was $105,000. The carrying Value of Machine #111 was $145,000. Accordingly Super Soups is recognizing a $40,000 loss. In planning for the year end financial statements the staff accountant is unsure where in the Income Statement the $40,000 loss should be presented. (should the loss be presented as an unusual item, discontinued operation, etc.) Accounting Issues: Where /how should Super Soups present the $40,000 loss in the Income Statement for the year ending 2/28/22?
Super Soups, Inc. is a Chicago based company that produces soup. Super Soups is publicly traded and has a February 28, 2022 fiscal year end. The demand for Super Soup’s products has increased significantly during COVID-19 (primarily to the number of people working from home). Super Soups did an analysis of the capabilities of the old production equipment and all but one machine were determined to be in superior condition. Machine #111 was assessed to be operating at only 50% of the necessary production level and would be able to generate $120,000 from production and a sale of the machine in the next fiscal year.
As a result of this analysis Super Soups decided to sell Machine #111. The company was able to locate a buyer immediately and sold Machine #111 on February 21, 2022. The sales price of the machine was $105,000. The carrying Value of Machine #111 was $145,000. Accordingly Super Soups is recognizing a $40,000 loss.
In planning for the year end financial statements the staff accountant is unsure where in the Income Statement the $40,000 loss should be presented. (should the loss be presented as an unusual item, discontinued operation, etc.)
Accounting Issues: Where /how should Super Soups present the $40,000 loss in the Income Statement for the year ending 2/28/22?
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