On December 31, 2021, the company’s fiscal year-end, the book
value of the assets of the horse division was $284,000. On that
date, the fair value of the assets, less costs to sell, was
$240,000. The before-tax loss from operations of the division for
the year was $180,000. The company’s effective tax rate is 25%. The
after-tax income from continuing operations for 2021 was
$440,000.
Required:
Prepare a partial income statement for 2021 beginning with income from continuing operations. Ignore EPS disclosures.
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 $480,000, instead of $240,000. Ignore EPS disclosures.
Answer :
(1) Prepare a partial Income statement for 2021
Particular | Amount | Amount |
Income from continuing operations (A) | $440,000 | |
Discontinued operations | ||
Operating loss | ($180,000) | |
Impairment loss [$284,000 - $240,000] | ($44,000) | |
Net loss before tax | ($224,000) | |
Income tax benefit [$224,000*25%] | $56,000 | |
Loss on discounted operations | ($168,000) | |
Net income | $272,000 |
(2) Prepare a partial income statement for 2021
Particular | Amount | Amount |
Income from continuing operations | $440,000 | |
Loss from operations of discontinued component | ($180,000) | |
Income tax benefit [$180,000*25%] | $45,000 | |
Loss on discontinued operations | ($135,000) | |
Net income | $305,000 |
On December 31, 2021, the company’s fiscal year-end, the book value of the assets of the...
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