Bubble Tea Corporation operates several stores in Ontario (Toronto, Mississauga, Oakville, Barrie and Huntsville). The restructuring of its organization on November 20, 2020, has led to the decision to sell its Huntsville store. In preparing financial statements at December 31, 2020, the following information was made available: The Huntsville operation incurred a loss of $283,500 for the 2020 calendar year, including $225,000 for the period January 1 to November 20, 2020. Estimated costs to sell are $300,000. At December 31, 2020, the fair value of the Huntsville assets is estimated at $7 million and the carrying (book) value is $7.3 million. The combined provincial and federal income tax rate is 30%. It is estimated that the operation will lose an additional $250,000 before it is sold. Required The Huntsville operation qualifies for reporting as a discontinued operation. What amount should be reported in the discontinued operations section of Bubble Tea’s 2020 income statement? In early 2021, the Huntsville operation is sold for $8.5 million, with actual costs to sell of $400,000. Additional disposal costs related to the sale are $500,000. The operation lost an additional $150,000 before it was sold. What amount should be reported in the discontinued operations section of Bubble Tea’s 2021 income statement?

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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Question

Bubble Tea Corporation operates several stores in Ontario (Toronto, Mississauga, Oakville, Barrie and Huntsville). The restructuring of its organization on November 20, 2020, has led to the decision to sell its Huntsville store. In preparing financial statements at December 31, 2020, the following information was made available:

The Huntsville operation incurred a loss of $283,500 for the 2020 calendar year, including $225,000 for the period January 1 to November 20, 2020.
Estimated costs to sell are $300,000.
At December 31, 2020, the fair value of the Huntsville assets is estimated at $7 million and the carrying (book) value is $7.3 million.
The combined provincial and federal income tax rate is 30%.
It is estimated that the operation will lose an additional $250,000 before it is sold.

Required

The Huntsville operation qualifies for reporting as a discontinued operation. What amount should be reported in the discontinued operations section of Bubble Tea’s 2020 income statement?
In early 2021, the Huntsville operation is sold for $8.5 million, with actual costs to sell of $400,000. Additional disposal costs related to the sale are $500,000. The operation lost an additional $150,000 before it was sold. What amount should be reported in the discontinued operations section of Bubble Tea’s 2021 income statement?

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