Question

Pascoreli Clothing is a clothing component of Lucha Libre, Inc. Pascoreli has been losing $35,000 per month since April 1 20X7. On May 31, 20x8, Lucha Libre’s management committed to an immediate sale of Pascoreli. Management expects to find a buyer before March 31, 20x9. Lucha Libre has estimated Pascoreli’s net assets have a fair value $1,300,000 and the book value of the group’s assets is $1,700,000. Lucha Libre sold Pascoreli on April 30, 20x9 for $1,100,000. What amount if any would Lucha Libre report from discontinued operations before taxes for the year ended December 31, 20x8

• A.

  (820,000)

• B.

  (420,000)

• C.

  Not considered a discontinued opearations

• D.

  (400,000)

• On December 31, 20x9, Pathos Food Service’s management decided to sell the Baclava division which has book value of $810,000. Management believes the division can be sold for $705,000 after spending $101,000 in sales costs. Baclava reported a monthly income of $29,000 in 20X9 and a monthly loss of $11,000 in 2x10. The division meets the rules to be classified as an asset held for sale as well as qualifying as a discontinued operation. The division sold for $692,000 on March 31, 2x10. Ignore income taxes. What does the company report as discontinued operations in 2x10?

• A.

  (46,000) loss

• B.

  (11,000) loss

• C.

  (33,000) loss

• D.

  (13,000) loss

• Rosenburg Company tire division of its organization qualifies as a separate operating segment. In 20x8, the segment has operating income of $690,000. The segment meets all criteria of being held for sale. The segment is likely to be sold late in 20x9 at a loss. On Rosenburg’s income statement for 20x8, how is this segment reported?

• A.

  The $690,000 operating income is reported on the income statement as a discontinued operations

• B.

  The $690,000 operating income is reported on the income statement as an extraordinary item

• C.

  The $690,000 operating income is reported as revenues and expenses on the income statement

• D.

  The $690,000 operating income is reported as other gain/loss

Answer 1

1. option (C) IS CORRECT

Beacuse DISCONTINUED PERIOD INVOLVED NO INTERVENTION OF WORK BUT IN BUSINESS NO SUCH STATE WAS ARRIVED . PROPER WORKING ARE GOING ON. IF NOT GOING ON THEN 420000 WAS USED AS AMOUNT. 35000*12 (12 MONTHS)

35000 per month *12= 420000

2.  option (B) (11000) IS CORRECT

BECAUSE LOSS OF PARTICULAR MONTH TILL SELLOFF CONDITIONS IS SATISFIED ARE ELIGIBLE TO COUNT DOWN. NO EXTRA MONTH ARE UED IN IT .

3. OPTION (C) IS CORRECT.

BECAUSE IN 20X8 PROPER INCOME CONSIDERATION FOR WRITE OFF LOSS AND BEARING OF EXPENSES FULLY DEPENDS ON THIS INCOME.