Which is not a criterion for an operation to be classified as discontinued? A. The operation should represent a separate major line of business or geographical area B. The operation is part of a single plan to dispose of a separate major line of business or geographical area C. The operation is a subsidiary acquired exclusively with a view to resale D. The operation must be sold within three months of the year-end
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Which is not a criterion for an operation to be classified as discontinued?
A. The operation should represent a separate major line of business or geographical area
B. The operation is part of a single plan to dispose of a separate major line of business or geographical area
C. The operation is a subsidiary acquired exclusively with a view to resale
D. The operation must be sold within three months of the year-end
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- Which is not a criterion for an operation to be classified as discontinued? *The operation should represent a separate major line of business or geographical areaThe operation is part of a single plan to dispose of a separate major line of business or geographical areaThe operation is a subsidiary acquired exclusively with a view to resaleThe operation must be sold within three months of the year-endKandon Enterprises, Inc., has two operating divisions; one manufactures machinery and the other breeds and sellshorses. Both divisions are considered separate components as defined by generally accepted accounting principles. The horse division has been unprofitable, and on November 15, 2018, Kandon adopted a formal plan to sellthe division. The sale was completed on April 30, 2019. At December 31, 2018, the component was consideredheld for sale.On December 31, 2018, 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 incomefrom continuing operations for 2018 was $400,000.Required:1. Prepare a partial income statement for 2018 beginning with income from continuing operations. Ignore EPSdisclosures.2. Repeat requirement 1 assuming that…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…
- Nonrecurring Items Lynn Company sells a component of its business in the middle of the year. On the date of sale, the net proceeds received were less than the aggregate book value of the components net assets. The component was operating at a loss from the beginning of the year. In addition, Lynn had one of its manufacturing plants destroyed by an earthquake during the year. Earthquakes are not uncommon in Lynns operating environment. Required: 1. Explain how Lynn should report discontinued operations of a component of its business on its income statement for this year. Do not discuss earnings per share requirements. 2. Explain how Lynn should report the loss from the earthquake on its income statement for this year. Do not discuss earnings per share requirements.A company has included in its consolidated financial statements this year a subsidiary acquired several years ago that was appropriately excluded from consolidation last year. This results in a. an accounting change that should be reported prospectively. b. an accounting change that should be reported by restating the financial statements of all prior periods presented. c. a correction of an error. d. neither an accounting change nor a correction of an error.WOODBRICKS CORP. decided on September 1, 2021 to dispose of a component of business. The component was sold on October 31, 2021. The net income of WOODBRICKS CORP. for the year 2021 included income of P8,000,000 from operating the discontinued segment from January 1 to the date of disposal. The entity incurred a loss of P3,000,000 on the October 31 sale of the business component. What amount should be reported as pretax income or loss from discontinued operations for 2021?
- On July 1, 2018, the company adopted a plan to discontinue a division that qualifies as a component of an entityas defined by GAAP. The assets of the component were sold on September 30, 2018, for $50,000 less than theirbook value. Results of operations for the component (included in the above account balances) were as follows:1/1/2018–9/30/2018 2017Sales $400,000 $500,000Cost of goods sold (290,000) (320,000)Administrative expenses (50,000) (40,000)Selling expenses (20,000) (30,000)Operating income before taxes $ 40,000 $110,000In addition to the account balances above, several events occurred during 2018 that have not yet been reflectedin the above accounts:1. A fire caused $50,000 in uninsured damages to the main office building. The fire was considered to be aninfrequent but not unusual event.2. Inventory that had cost $40,000 had become obsolete because a competitor introduced a better product. Theinventory was sold as scrap for $5,000.3. Income taxes have not yet been…When a component of a company's operations is classified as held for sale at the end of an accounting period, The component may not be reported as a discontinued operation until sold. The component will be reported on the balance sheet at the higher of its (1) fair value net of any costs to sell or (2) book value. The company may report the difference between the component's (1) fair value net of any costs to sell and (2) book value as a loss from discontinued operations on the income statement. None of these choices apply.On September 17, 2018, 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, 2018, the company’sfiscal year-end, the division had not yet been sold, but was considered held for sale. The net fair value (fair valueminus 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 2018 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, 2018.
- On July 1, 2020, an entity decided to discontinue its Electronics Division, a separately identifiable component of business. On December 31,2020, 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 for the year disclosed the following data relative to the Electronics Division:Operating loss for 2020 8,000,000Loss on disposal of some Electronics Division assets during 2020 500,000Expected operating loss in 2021 preceding final disposal 1,000,000Expected gain in 2021 on disposal of division 2,000,000Income tax…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.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…