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 f) After tax income or loss on write-down of Division P held-for-sale -$84,000   2. Prepare the discontinued operations section of Fleiner’s income statement. Loss  from operations of discontinued Division P net of income tax credit $_____________________ Loss on write-down of held-for-sale Division P net of income tax credit $________________________ Total   $________________________

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
Chapter12: Intangibles
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Problem 18E
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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
f) After tax income or loss on write-down of Division P held-for-sale -$84,000

 

2. Prepare the discontinued operations section of Fleiner’s income statement.

Loss  from operations of discontinued Division P net of income tax credit $_____________________

Loss on write-down of held-for-sale Division P net of income tax credit $________________________

Total   $________________________

 

 

Expert Solution
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Discontinuing of operations represents the report of the entity or division which is either held for sale or already sold.

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