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.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 11PB: On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received...

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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.…
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.
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…
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.
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, 2016, Kandon adopted a formal plan to sell the division. The sale was completed on April 30, 2017. At December 31, 2016, the component was considered held for sale. On December 31, 2016, the company’s fiscal year-end, the book value of the assets of the horse division was $250,000. 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 40%. The after-tax income from continuing operations for 2016 was $400,000. Required: 1. Prepare a partial income statement for 2016 beginning with income from continuing operations. Ignore EPS disclosures. 2. Repeat requirement 1…
On September 17, 2016, Ziltech, Inc., entered into an agreement to sell one of its divisions that qualifies as a component of the entity according to generally accepted accounting principles. By December 31, 2016, the company’s fiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair value minus costs to sell) of the division’s assets at the end of the year was $11 million. The pretax income from operations of the division during 2016 was $4 million. Pretax income from continuing operations for the year totaled $14 million. The income tax rate is 40%. Ziltech reported net income for the year of $7.2 million. Required: Determine the book value of the division’s assets on December 31, 2016.
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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?
Helen Company's directors decided on November 1, 2011 to restructure the entity's operations as follows: Factory A would be closed down and put on the market for sale. Employees working in Factory A would be retrenched on November 30, 2011, and would be paid their accumulated entitlements plus six months' wages. Some employees working in Factory A would be transferred to Factory B, which would continue operating. On December 31, 2011, the following transactions and events had occurred: The retrenched employees have left and their accumulated entitlements have been paid. However, an amount of P1,000,000, representing a portion of the six months' wages for the retrenched employees, has still not been paid. Costs of P300,000 are expected to be incurred in transferring the remaining employees to their new work in Factory B. The transfer is planned for January 15, 2012. One employee, Juan Cruz, remains in order to complete administrative tasks relating to the closure of Factory A and the…
On November 30, Fleiner Company announced its plans to discontinue the operations of Division P (a major component of the company) by selling the division. On December 31, Division P had not yet been sold and was classified as held for sale. On this date, Division P had assets with a book value of $920,000 and liabilities with a book value of $610,000. Fleiner estimates that the fair value of Division P on this date is $190,000. During the year, Division P earned revenues of $920,000 and incurred expenses of $980,000. Fleiner is subject to a 30% income tax rate. 1. Compute the following for Division P of Fleiner Company: a) Pretax income or loss from discontinued operations -$60,000 b) Income tax expense or credit for discontinued operations $18,000 c) After tax income or loss from discontinued operations -$42,000 d) Pretax income or loss on write-down of Division P held-for-sale -$1,200 e) Income tax expense or credit for write-down of Division P held-for-sale $36,000…
Gandaph Corporation purchased a division five years ago for $ 3 million. The division has been identified as a reporting unit that is cash-generating under IFRS. Management is reviewing the division for impairment of goodwill and has estimated the fair value of the reporting unit to be $ 3.28 million and the unit’s value in use to be $ 3.45 million. In addition, there would be $ 85,000 in direct costs should the company decide to sell. The carrying amounts of the division’s net assets, including the associated goodwill of $ 1,450,000, are listed below. Carrying Amount of Net Assets Including Goodwill Cash $ 300,000 Receivables 450,000 Inventory 1,050,000 Property, plant, and equipment (net) 1,200,000 Goodwill 1,450,000 Less: Accounts and notes payable (750,000) Net assets, at carrying amounts $ 3,700,000 Required: Determine if goodwill is impaired and provide the related journal entries, if any, under both ASPE and IFRS.
Lion 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 1,2020 the board of directors voted to approve the disposal of this division. The sale is expected to occur in August 2021. The food distribution had revenue of P15,000,000 and expenses of P10,000,000for the period October 1 to December 31.The carrying amount of the division’s net assets on December 31, 2020 was P55,000,000 and the fair value less cost of disposal was P60,000,000.The sale contract required Lion to terminate certain employees incurring an expected termination cost of P4,000,000 to be paid by December 15, 2021. The income tax rate is 30%. REQUIREMENT: 1. What amount should be reported as income from discontinued operation for 2020? 2. What amount of expected gain is not recognized?