Question

ASSIGNMENT 2-2

USE U.S. GAAP ASU TOPIC

Part B. ABC Co. decided on March 3, 2018 to dispose of their Widget Segment. The sale of the segment was completed on November 13, 2018. The disposal of this segment qualifies as a discontinued operation. Income Statement data for ABC for calendar years 2016-2018 are as follows:

                                                               2018                           2017                           2016   

Sales                                                  $3,000,000               $2,700,000               $2,500,000

Cost of goods sold                           1,800,000                1,593,000                1,525,000

Operating expenses                             700,000                     680,000                     650,000

These amounts include the operating results for the Widget Segment through its disposal on November 13, 2018. Income Statement data for the Widget Segment separately for 2016-2018 are as follows:

                                                               2018                           2017                           2016   

Sales                                                  $450,000                   $600,000                   $700,000

Cost of goods sold                           315,000                   408,000                   455,000

Operating expenses                        120,000                   150,000                   130,000

The book value of the assets and liabilities of Widget on November 13, 2018 was 4,800,000. The sales price was 6,210,000. ABC has a tax rate of 28% for 2016 & 2017 and a rate of 25% for 2018.

Required: Prepare, in good form, complete comparative Income Statements for ABC for the years 2016-2018.

Assignment 2-2 Part B. ABC Co. decided on March 3, 2018 to dispose of their Widget Segment. The sale of the segment was completed on November 13, 2018. The disposal of this segment qualifies as a discontinued operation. Income Statement data for ABC for calendar years 2016-2018 are as follows: 2018 2016 Sales Cost of goods sold Operating expenses $2,700,000 1,593,000 680,000 $3,000,000 $2,500,000 1,525,000 650,000 1,800,000 700,000 These amounts include the operating results for the Widget Segment through its disposal on November 13, 2018. Income Statement data for the Widget Segment separately for 2016-2018 are as follows: 2018 2016 Sales Cost of goods sold Operating expenses $700,000 $450,000 315,000 120,000 $600,000 408,000 150,000 455,000 130,000 The book value of the assets and liabilities of Widget on November 13, 2018 was 4,800,000. The sales price was 6,210,000, ABC has a tax rate of 28% for 2016 & 2017 and a rate of 25% for 2018 Required: Prepare, in good form, complete comparative Income Statements for ABC for the years 2016-2018.

Answer 1

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		Year 2018	Year 2017	Year 2016
Sales	Working-1	$ 2,550,000	$ 2,100,000	$ 1,800,000
Less: Cost of Goods Sold	Working-1	$-1,485,000	$-1,185,000	$-1,070,000
Gross Margin		$ 1,065,000	$     915,000	$     730,000
Less: Operating Expense	Working-1	$   -580,000	$   -530,000	$   -520,000
Income from continuing operations before income taxes		$     485,000	$     385,000	$     210,000
Income tax expense 28% and 25%		$   -121,250	$   -107,800	$     -58,800
Income from continuing operations	A	$     363,750	$     277,200	$     151,200
Discontinued operations:
Income from discontinued operations	Working-2	$       15,000	$       42,000	$     115,000
Gain on disposal of dicontinued operations	6210000-4800000	$ 1,410,000
		$ 1,425,000	$       42,000	$     115,000
Income tax expense 28 and 25		$   -399,000	$     -10,500	$     -28,750
Income from discontinued operations	B	$ 1,026,000	$       31,500	$       86,250
Net Income	A+B	$ 1,389,750	$     308,700	$     237,450
Working-1
Sales		$ 3,000,000	$ 2,700,000	$ 2,500,000
Less: Widget Sale		$   -450,000	$   -600,000	$   -700,000
		$ 2,550,000	$ 2,100,000	$ 1,800,000
COGS		$ 1,800,000	$ 1,593,000	$ 1,525,000
Less: Widget COGS		$   -315,000	$   -408,000	$   -455,000
		$ 1,485,000	$ 1,185,000	$ 1,070,000
Operating Expense		$     700,000	$     680,000	$     650,000
less: Widget Op Exp		$   -120,000	$   -150,000	$   -130,000
		$     580,000	$     530,000	$     520,000
Working-2
Widget income before tax:
Widget Sale		$     450,000	$     600,000	$     700,000
Less: Widget COGS		$   -315,000	$   -408,000	$   -455,000
Less: Widget Op Exp		$   -120,000	$   -150,000	$   -130,000
		$       15,000	$       42,000	$     115,000