Case 7. On January 1, 2020, Power Corporation approved a plan to dispose of a business segment. It is expected that the sale will occur on April 30, 2021. On December 31, 2020, the carrying value of the net assets of the segments was P4,000,000 and the net recoverable amount was P3,600,000. During 2016, the company paid employees severance and relocation costs of P200,000 as a direct result of the discontinued operations. The revenues and expenses of the discontinued segment during 2020 were as follows: (Income tax rate is 35%) 4,400,000 5,800,000 Revenue Еxpense
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- On December 31, 2021, the end of the fiscal year, Revolutionary Industries completed the sale of its robotics business for $10.0 million. The robotics business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $7.5 million. The income from operations of the segment during 2021 was $4.5 million. Pretax income from continuing operations for the year totaled $12.5 million. The income tax rate is 25%. Prepare the lower portion of the 2021 income statement beginning with income from continuing operations before income taxes. Ignore EPS disclosures. (Amounts to be deducted and negative amounts should be indicated with a minus sign. Enter your answers in whole dollars and not in millions. For example, $4,000,000 rather than $4.)On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life. Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively. Assume that Republic uses the cost method to account for its investment in Barre. Compute the [ADJ] consolidating entry necessary for 2021. Select one: a. $155,750 b. $205,000 c. $320,750 d. $165,000 e. $245,750 x Your answer is incorrect. The correct answer is: $155,750. The following information pertains to Best Food (BF) Company’s intangible assets: a. On January 1, 2020, BF signed an agreement to operate as a franchisee of Macky’s Food Chain for an initial franchise fee of P1,500,000. Of this amount, P300,000 was paid when the agreement was signed and the balance is payable in 4 annual payments of P300,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020 of the 4 annual payments discounted at 14% (the implicit rate for a loan of this type) is P874,000. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor annually. BF’s revenue from the franchise for 2020was P19 million. BF estimates the useful life of the franchise to be 10 years. b. BF incurred P1,300,000 of experimental and developmental costs in its laboratory to develop a patent which was granted on January 2,…
- ABC Corp, comitted to sell a division on March 22, 2022. It sold the division on June 14, 2024. Income from operating this divisio was $2,408,000, $829,600 and $247,200 in 2022, 2023 and 2024, respectively. On December 31, 2022, the carrying value of the division was $7,080,000 and the fair value was &7,000,000. On December 31, 2023, the fair value of the division was $7,160,000 and the carrying value of the division was $7,080,000. The division was sold for $6,880,000 when the carrying value was $7,080,000 Prepare the discontinued operations section of the income statement for 2022 throuh 2024, assuming ABC Corp's income tax rate is 20%On December 31, 2019, the Board of Directors of EFF Company committed to a plan to discontinue the operations of its furniture division. The entity estimated that the furniture’s operating loss for 2020 would be ₱500,000 and that the fair value of its facilities was ₱300,000 less than the carrying amount. The furniture division’s 2019 operating loss was ₱1,400,000 and the division was actually sold for ₱400,000 less than the carrying amount in 2020. The effective tax rate is 30%. What amount should be reported as loss from discontinued operations in 2019? ₱ 1,190,000 ₱ 0 ₱ 1,400,000 ₱ 980,000On July 31, 2020, Lee Co. a public company decides to put one of the divisions up for sale so that it can focus on further developing its other division. The capital assets of the division up for sale (recorded to the PPE account), were purchased January 1, 2016 with an original cost of $990,000. The annual depreciation is $33,000. The fair value of the building on July 31, 2020 was $840,000. The costs to sell were $12,000. The income statement on December 31, 2020 of the entity before any adjustments for the asset held for sale was as follows: $8,600,000 $3,500,000 $1,000,000 $240,000 $1,200,000 $798,000 Revenue Cost of goods sold Administrative expenses Depreciation expense Other Expenses Income tax expense Net income 1,862,000 The income statement details for the asset held for sale is as follows: $3,200,000 $1,600,000 $300,000 $33,000 $400,000 $260,100 $606,900 Revenue Cost of goods sold Administrative expenses Depreciation expense Other Expenses Income tax expense Net income…
- On July 1, 2021, Company A purchased land and buildings and agreed to rent the facility to a non-affiliated company on a month-by- month basis. Pertinent details follow: i. The company paid 6.0million fortheinvestmentpropertyplus200,000 in related legal fees. The purchase price was allocated 80% to the building and 20% to the land. ii. The estimated useful life of the building is 30 years at which time the salvage value is expected to be $0. iii. The company uses the straight-line method to depreciate all depreciable assets. iv. An appraisal valued the investment property at $6.4 million as at December 31, 2021, year-end-5.1millionbuildingand1.3 million land. Required (1) Prepare the journal entry to record the purchase of the property. (2) Prepare the year-end adjusting entries for 2021 assuming that the company elects to use the cost model to account for investment property. (3) Prepare the year-end adjusting entries for 2021 assuming that the company elects to use the fair value…On September 1, 2021, Jacob Furniture Mart enters into a tentative agreement to sell the assets of its Office Furniture division. This division qualifies as a component of the entity according to GAAP regarding discontinued operations. The division's contribution to Jacob's operating income for 2021 was a $2.70 million loss before income tax. Jacob has an average tax rate of 25%. Assume that Jacob had not yet sold the division's assets by the end of 2021. Further, assume that the fair value less cost to sell of the division's assets at December 31, 2021, was $23.70 million and was expected to remain the same when the assets are sold in 2022. The book value of the division's assets was $18.73 million at the end of 2021. Required: 1. What would Jacob report in its 2021 income statement regarding the Office Furniture division? (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) 2. What would Jacob report in its 2021 balance sheet…On December 31, 2021, the end of the fiscal year, California Microtech Corporation completed the sale of its semiconductor business for $10 million. The semiconductor business segment qualifies as a component of the entity according to GAAP. The book value of the assets of the segment was $8 million. The loss from operations of the segment during 2021 was $3.6 million. Pretax income from continuing operations for the year totaled $5.8 million. The income tax rate is 25%. Prepare the lower portion of the 2021 income statement beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
- On 1 January 2019, ABC, Inc. decided to replace its existing machinery which it had acquired on 1 January 2016 for P40 million and initiated process for acquisition of new machinery. Simultaneously, it also initiated efforts to sell of the old machinery. The new machinery was commissioned on 30 March 2019. The company depreciates machinery assuming a zero residual value and 5-year total useful life. The carrying value of old machinery as at 1 January 2019 worked out to P16 million. If the fair value of the old machinery is P12 million and it would cost 10% of the sale proceeds to close the deal, find out when the company should classify the machinery as held-for-sale. 1.) What is the journal entry to record the reclassification? 2.) How much is the total depreciation expense to be recognized for 2019?On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of \( \$ 36 \) million. Ameen uses straight-line depreciation for financial statement reporting and deducted 100 % of the equipment's cost for income tax reporting in 2021. At December 31, 2023, the book value of the equipment was \(\$ 30 \) million. At December 31, 2024, the book value of the equipment was \(\$ 28 \) million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2024 was \(\$ 50 \) million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2024 income taxes. Assume an income tax rate of \( 25 \% \). 2. What is Ameen's 2024 net income?On January 1, 2020, A Company decided to sell one of its machineries with a cost of P3,400,000 and accumulated depreciation of P650,000. Depreciation was P280,000 per annum. The company undertook all necessary actions to be able to classify the asset as held for sale. It is estimated that the machine can be sold for its fair value of P2,680,000, incurring P40,000 selling costs in the process. On March 31, 2020, the machine was not yet sold, and there was an increase in fair value to P2,810,000 and selling costs of P40,000. On June 30, 2020, A Company was able to sell the plant for P2,850,000 after incurring P30,000 in selling costs. Determine gain (loss) to be recognized on the sale of machinery on June 30, 2020. a. 50,000 b. 70,000 c. 180,000 d. 120,000