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 area The operation is part of a single plan to dispose of a separate major line of business or geographical area The operation is a subsidiary acquired exclusively with a view to resale The operation must be sold within three months of the year-end

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 area The operation is part of a single plan to dispose of a separate major line of business or geographical area The operation is a subsidiary acquired exclusively with a view to resale The operation must be sold within three months of the year-end

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 5C: Nonrecurring Items Lynn Company sells a component of its business in the middle of the year. On the...

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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
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.
Kandon 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…
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.
Comprehensive: Income Statement and Retained Earnings Milwaukee Manufacturing Company presents the following partial list of account balances, after adjustments, as of December 31, 2019: The following information is also available but is not reflected in the preceding accounts: a. The company sold Division E (a major component of the company) on August 2, 2019. During 2019, Division E had incurred a pretax loss from operations of 16,000. However, because the acquiring company could vertically integrate Division E into its facilities, Milwaukee Manufacturing was able to recognize a 42,000 pretax gain on the sale. b. On January 2, 2019, without warning, a foreign country expropriated a factory of Milwaukee Manufacturing which had been operating in that country. As a result of that expropriation, the company has incurred a pretax loss of 30,000. c. The common stock was outstanding for the entire year. A cash dividend of 1.20 per share was declared and paid in 2019. d. The 2019 income tax expense totals 31,050 and consists of the following: Required: 1. As supporting documents for Requirement 2, prepare separate supporting schedules for selling expenses and for general and administrative expenses (include depreciation expense where applicable in these schedules). 2. Prepare 2019 multiple-step income statement for Milwaukee Manufacturing. 3. Prepare a 2019 retained earnings statement. 4. Next Level What was Milwaukee Manufacturings return on common equity for 2019 if its average shareholders equity during 2019 was 500,000? What is your evaluation of this return on common equity if its target for 2019 was 15%? 5. Next Level Discuss how Milwaukee Manufacturings income statement in Requirement 2 might be different if it used IFRS.
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, 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…
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…
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…
The fuel and oil as a major line of business of San Miguel Enterprises becomes available for immediate sale in its present condition. The termination costs of employees resulting from the discontinuance should be A. Included in the computation of other comprehensive income B. Shown as other expense C. Shown as a prior period adjustment D. Netted against the income from operations of the component as part of discontinued operation E. None of themS1: The publication of interim financial reports is on a quarterly basis.S2: For financial statements at interim date, inventories shall be measured using the gross profit method because conducing inventory count is not required. * A. Both statements are true B. Both statements are false C. Only statement 1 is true D. Only statement 2 is true
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.
Camel Company sells a segment of its operations at a loss. Camel has not previously experienced such an event and does not expect to again.The loss from the disposal of the segment should be reported in the income statement as: Question 16 options: A) A separate amount in comprehensive income B) A separate amount in net income from continuing operations C) A separate amount in a discontinued operations section D) As part of cost of goods sold