Question

Question 1 0.9 pts USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (8) QUESTIONS: On August 1, 20x1, Rocket Retailers adopted a plan to discontinue its children's clothing division, which qualifies as a component of the business according to GAAP. The disposal of the division was expected to be concluded by June 30, 20x2. On December 31, 20x1, Rocket's fiscal year-end, the following information relative to the discontinued operation was accumulated: $ 438,000 180,000 Operating Income (pre-tax) Jan 1, 20x1 - Dec 31, 20x1 Estimated Operating Income (pre-tax) Jan 1, 20x2 - June 30, 20x2 Net Book Value of the Component Fair Value of the Component Estimated Disposal Costs Income Tax Rate 2,750,000 2,500,000 100,000 21% Because the sale was not complete by December 31, 20x1, Rocket had to test the component for impairment. Determine the Impairment Loss (net of tax), that Rocket would report in their 20x1 footnotes (if any): $__ *If an impairment loss is indicated, just record your answer as a positive number. Do not use commas or dollar signs. Example: If you determine there is an Impairment Loss of 100,000 (pretax), enter your answer as 79000. Remember, your answer should be reported after tax of 21% has been deducted.

- Please help, I honestly am so lost on this problem...

Answer 1

Estimated operating in come = 180000 (-) Impourment lors - (310000). lon from discontinued operations & tax saving due to lors (170000) 35700 Netlos affertax from des continued operations (134300) = | ( 134,300)

Income. Before taxes I, soo,000 (-) Tax @212 (315000) Profit from contnuing operations (185,000

Prosit (los from Dis continued operations Actual income from discontinued 120.000 - operations (-) Impairment loss (300000) a los from discontinued to Opera hon) (230000) 30 000 f. saving in tax due to loss @ 21% 148300 . Loss after tax from . . dis continued operation (181700)

I Income from Continuing operations 1500,000 "Income from discontinued operations losi from discontrend operations (181700) loss from disposal I fall value - Bookvalue ) (150,000) of componeur) : ( 2,600,0001 - 2750,000) (331700) Net Income before Paxe, 1168 300 - Taxes @27 (245343) 922957 mer Income Affer Taxes.

EPI- Conhnine operations 1500,000 (315000) Incomeonato - Tax @ urr. .. mer Income after tax from Continuing operations 118rooo ERE ver Income NOOf Shocks outsrauding 1185000 400,000 :-2.37

Eps - Discontinued operations Loss from discontined operations No. of shares (shoue outstandine (181700) 500000 (36) rounded off Randed off

EPS = Net income cor No. of shares outstanding .922957 500,000 I 1.85 ago

carrying cours Net Booksuelle 3 27,50,000, fair value - Disposal costs. 2,100,000 – 10o, ow - 2400,000 Impairment loss. carrying cost - Nerfeir.value after any Selling Colt 2750,000 – 2,400,000 350,000 Pretax Portax after 21% = 276,500