Question

Instructions Chart of Accounts On November 1, 2019, Woods Company announced its plans to sell its subsidiary, Williams Division (a major strategic component of the company). By December 31, 2019, Woods had not sold Williams Division and so it classifies the division as held for sale. CHART OF ACCOUNTS Woods Company During 2019, Woods recorded the following revenues and expenses for Williams Division and the remainder of the company: General Ledger Williams Division Remainder of Company Sales revenue $170,000 $950,000 ASSETS REVENUE Cost of goods sold 119,000 560,000 111 Cash 411 Sales Revenue Operating expenses 42,000 190,000 121 Accounts Receivable 141 Inventory EXPENSES Woods is subject to a 30% income tax rate. 152 Prepaid Insurance 500 Cost of Goods Sold 181 Equipment 511 Insurance Expense On December 31, 2019, the net book value of Williams Division is $500,000, consisting of assets of S910,000 and liabilities of $410,000. On this date, Woods estimates that the fair value of Williams Division is $420,000. The company had 50,000 shares of common stock outstanding during all of 2019 189 Accumulated Depreciation 512 Utilities Expense 191 Assets of held-for-sale Williams Division 521 Salaries Expense 532 Bad Debt Expense Required: LIABILITIES 540 Interest Expense 1. Prepare the journal entry on December 31, 2019, to record the pretex loss on held-for-sale Williams Division. Show supporting 211 Accounts Payable 231 Salaries Payable 541 Depreciation Expense 559 Miscellaneous Expenses calculations 2. Prepare a 2019 multiple-step income statement for Woods. 250 Unearned Revenue 701 Loss on Write-Down of Held-for-Sale Williams 3. Show how Williams Division would be reported on Woods's December 31, 2019, balance sheet. Division 261 Income Taxes Payable 292 Liabilities of Held-for-Sale Williams Division 910 Income Tax Expense EQUITY 311 Common Stock 331 Retained Earnings

Answer 1

1) Prepare the journal entry on December 31, 2019, to record the pretax loss on held-for-sale Williams Division.
GENERAL JOURNAL
DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
Dec 31, 21019	Loss on write down of held for sale -  Williams Division	701	$  80,000.00
	Assets of held for sale - Williams Division	521		$ 80,000.00
	To record the pretax loss on held-for-sale Williams Division
Supporting calculations:
The amount of the journal entry on December 31, 2016, to record the pretax loss on held-for-sale Williams Division is calculated as:
Fair value:		$           420,000.00
Book value of net assets:
Assets	$                                                                          910,000.00
Less: Liabilities	$                                                                        (410,000.00)
Net book value		$           500,000.00
Pretax loss		$           (80,000.00)
book value of net assets less fair value of net assets of discontinued Williams Division	Correct
book value of net assets of discontinued Williams Division
fair value of net asset of discontinued Williams Division
income from operations of discontinued Williams Division
Prepare a 2019 multiple-step income statement for Woods. Additional Instructions
WOODS COMPANY
Income Statement
For the Year Ended December 31, 2019
Sales revenue		$           950,000.00
Less: cost of good Sold		$           560,000.00
Gross Profit		$           390,000.00
Less: Operating Expenses		$           190,000.00
Pretax income from cont. operations		$           200,000.00
Less: Income Tax @ 30%		$             60,000.00
Income from continuing operations		$           140,000.00
Results from discontinued operations:
Income from operations of discontinued Williams Division (net of $2,700 income taxes) *	$                                                                              6,300.00
Loss from write-down of held-for-sale Williams Division (net of $24,000 income tax credit) **	$                                                                          (56,000.00)	$           (49,700.00)
Net Income		$             90,300.00
*$170,000 - $119,000 - $42,000 = $9,000 × (1 - 0.30)
**$80,000 × (1 - 0.30)
Components of Income	Earnings per Common Share (50,000 shares)
From continuing operations	$                                                                                     1.20
From discontinuing operations	$                                                                                   (0.99)
Net Income	$                                                                                     1.81
BALANCE SHEET
Show how Williams Division would be reported on Woods’s December 31, 2016 balance sheet. Additional Instructions
WOODS COMPANY
Partial Balance Sheet
31-Dec-19
Assets		Liabilities
		Shareholders' Equity:
		Common Stock
		Less: Loss from write-down of held-for-sale Williams Divisio	$ (49,700.00)