Q6: Partway is in the process of preparing its financial statements for the year ended 31 October2006. The company's main activity is in the travel industry mainly selling package holidays (flights andaccommodation) to the general public through the Internet and retail travel agencies. During thecurrent year the number of holidays sold by travel agencies declined dramatically and the directorsdecided at a board meeting on 15 October 2006 to cease marketing holidays through its chain of travelagents and sell off the related high-street premises. Immediately after the meeting the travel agencies'staff and suppliers were notified of the situation and an announcement was made in the press. Thedirectors wish to show the travel agencies' results as a discontinued operation in the financialstatements to 31 October 2006. Due to the declining business of the travel agents, on 11 August 2006(three months before the year-end) Partway expanded its Internet operations to offer car hire facilitiesto purchasers of its Internet holidaysThe following are Partway's summarized income statement results - years ended: ------------31 October 2006--31 Oct 2005InternetTravel agenciesCar hireTotalTotalRevenue230001400020003900040000Cost of sales(18000)(16500)(1500)(36000)(32000)Gross Profit/(loss)(2500)(1500)(4000)500050030008000Operating ExpensesProfit/(Loss) Before(1000)(100)(2600)(2000)40004004006000taxThe results for the travel agencies for the year ended 31 October 2005 were: revenue $18 million, costof sales $15 million and operating expenses of $1.5 million.Required:79(a) Discuss whether the directors' wish to show the travel agencies' results as a discontinued operationis justifiable.(b) Assuming the closure of the travel agencies is a discontinued operation, prepare the (summarized)income statement of Partway for the year ended 31 October 2006 together with its comparatives.

Discontinued operations are those operations on for which company has shut or close down the…

(a) Discuss whether the directors' wish to show the travel agencies' results as a discontinued operation is justifiable. (b) Assuming the closure of the travel agencies is a discontinued operation, prepare the (summarized) income statement of Partway for the year ended 31 October 2006 together with its comparatives.

(a) Discuss whether the directors' wish to show the travel agencies' results as a discontinued operation is justifiable. (b) Assuming the closure of the travel agencies is a discontinued operation, prepare the (summarized) income statement of Partway for the year ended 31 October 2006 together with its comparatives.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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