Question

Check my work 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. 10 points On December 31, 2021, the company's fiscal year-end, the book value of the assets of the horse division was $350,000. On that date, the fair value of the assets, less costs to sell, was $300,000. The before-tax loss from operations of the division for the year was $240,000. The company's effective tax rate is 25%. The after-tax income from continuing operations for 2021 was $500,000. eBook Hint Required: Print References 1. Prepare a partial income statement for 2021 beginning with income from continuing operations. Ignore EPS disclosures. 2. Prepare a partial income statement for 2021 beginning with income from continuing operations. Assume that the estimated net fair value of the horse division's assets was $600,000, instead of $300,000. Ignore EPS disclosures.

Answer 1

Required 1:
KANDON ENTERPRISES INC.
Partial Income Statement
For the year ended December 31,2021
Income from continuing operations	$ 500,000
Discontinued Operations Gain (loss):
Loss from operations of Discontinued Component (See note 1 )	($290,000)
Income tax benefit ($290,000*25%)	$ 72,500
Loss from Discontinued Operations	($ 217,500)
Net income($ 500,000 -$ 217,500)	$ 282,500

Required 2:
KANDON ENTERPRISES INC.
Partial Income Statement
For the year ended December 31,2021
Income from continuing operations	$ 500,000
Discontinued Operations Gain (loss):
Loss from operations of Discontinued Component(see note 2)	($ 240,000)
Income tax benefit($240,000*25% )	$ 60,000
Loss from Discontinued Operations	($ 180,000)
Net income ($ 500,000 -$ 180,000)	$ 320,000

Explanation is given below :
Note 1 :
Loss from operations of Discontinued Component(Including impairment loss )
Impairment loss = $ 300,0000 -$ 350,0000 = ($ 50,000)
Loss from operations of Discontinued Component( $240,000+$ 50,000) = $ 290,000
To Calculate the Net after tax loss on discontinued operations :
Particulars	Amount($)
Loss from operations	($ 240,000)
Impairment loss ( $ 300,0000 -$ 350,0000)	($ 50,000)
Net before tax loss	( $ 290,000)
Income tax benefit ($ 290,000 *25% )	$ 72,500
Net after tax loss on discontinued operations	($ 217,500)
Note 2 :
Loss from operations of discontinued component = ($ 240,000)
Because of including the operating loss during the year. But there is no
impairment loss ,
So, Loss from operations of discontinued component = ($ 240,000)
To Calculate the Net after tax loss on discontinued operations :
Particulars	Amount($)
Loss from operations	($ 240,000)
Impairment loss	$ 0
Net before tax loss	( $ 240,000)
Income tax benefit ($ 240,000 *25% )	$ 60,000
Net after tax loss on discontinued operations	($ 180,000)