Question

Results of Discontinued Operations On November 30, Fleiner Company announced its plans to discontinue the operations of Division P (a major component of the company) by selling the division. On December 31, Division P had not yet been sold and was classified as held for sale. On this date, Division P had assets with a book value of $920,000 and liabilities with a book value of $610,000. Fleiner estimates that the fair value of Division P on this date is $190,000. During the year, Division Pearned revenues of $920,000 and incurred expenses of $980,000. Fleiner is subject to a 30% income tax rate. Required: 1. Compute the following for Division P of Fleiner Company: a) Pretax income or loss from discontinued operations b) Income tax expense or credit for discontinued operations c) After tax income or loss from discontinued operations d) Pretax income or loss on write down of Division Pheld-for-sale e) Income tax expense or credit for write-down Division Pheld-for-sales f) After tax income or loss on write-down of Division Pheld-for-sale 2. Prepare the discontinued operations section of Fleiner's income statement Results from discontinued operations $ $ from operations of discontinued Division P on write down of held for sale Division P Check My Work (Previne

Answer 1

id): 1 Amewer la) - Pre-tax income Revenue - Expenses $920,000 - $980,000 $60,000 loy 16) '- Income tax expense Pre- tax income x Taxrale $ 60,000X30% $ 18,000 of credit After-taxincome = Pre- tae income - Tazexpense = $60,CCO - $18,000 = $ 42.000 Pie - fox loss -Netbook value - Fair value = ($920,000- - $610,000) – $190,000 $ 310,000 - $190,000 = $ 120,00 on write down of P division le) Income tax expense = Pie - fax income x Tar rate $190,000 X30% $36,000 of credit lif): After-tax income = Pre-tax income - Tar expense 4 $120,000 - $36,000 $ 84,000 a) Result from discontinced After tax income from 1 After tax income from operations discontinued opesafiony' division of sale $42,000 + $ 84,000 total fou from operation is = $126,000

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