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Item 6

Item 6 2 points

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 $251,000. On that date, the fair value of the assets, less costs to sell, was $210,000. The before-tax loss from operations of the division for the year was $150,000. The company’s effective tax rate is 25%. The after-tax income from continuing operations for 2021 was $410,000.

Required:

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 $420,000, instead of $210,000. Ignore EPS disclosures.

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a partial income statement for 2021 beginning with income from continuing operations. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.) KANDON ENTERPRISES, INC. Partial Income Statement For the Year Ended December 31, 2021 Income from continuing operations Discontinued operations gain (loss): Loss from operations of discontinued component Income tax benefit $ 410,000 (150,000) X 37,500 Loss on discontinued operations Net income (loss) (112,500) 256,500 Ⓡ $ Required 1 Required 2 >

• Required 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 $420,000, instead of $210,000. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign.)

KANDON ENTERPRISES, INC. Partial Income Statement For the Year Ended December 31, 2021 Income from continuing operations $410,000selected answer correct Discontinued operations gain (loss): Loss from operations of discontinued componentselected answer correct (150,000)selected answer correct Income tax benefitselected answer correct 52,500selected answer incorrect not attempted not attempted Loss on discontinued operationsselected answer correct (97,500) Net income (loss) not attempted

Answer 1

Answer a $410,000 KANDON ENTERPRISES, INC. Partial Income Statement For the Year Ended December 31, 2021 Income from continuing operations Discontinued operations: Loss from operations of discontinued component ($191,000) Income tax benefit ($191,000 x 25%) $47,750 Loss on discontinued operations Net Income ($143,250) $266,750 Loss from operations of discontinued component = ($251,000 - $210,000) + $150,000 = $191,000 b Assume that the estimated net fair value of the horse division's assets was $420,000, instead of $210,000 KANDON ENTERPRISES, INC. Partial Income Statement For the Year Ended December 31, 2021 Income from continuing operations $410,000 Discontinued operations: Loss from operations of discontinued component ($150,000) Income tax benefit ($150,000 x 25%) $37,500 Loss on discontinued operations ($112,500) Net Income $297,500